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Sunday, 25 March 2018

What we’re tracking on 25 March 2018

It’s a very busy news morning as the first quarter roars to a close, with a presidential election set to take place in Egypt this week, expectations that the central bank will cut interest rates on Thursday, and global markets looking at a potential sell-off when markets open tomorrow, sparked by the prospect of a trade war.

The Ismail Cabinet will present its draft FY2018-19 budget to President Abdel Fattah El Sisi this week for approval before shipping it to the House of Representatives at the end of the month, Finance Minister Amr El Garhy told Al Masry Al Youm on Saturday. The minister reiterated that the budget would have a GDP growth target of 5.8%, a aim for a budget deficit of 8.4% of GDP, and increase spending on social welfare, wages, and commodity subsidies.

Bloated public sector gets even bloat-ier: Spending on wages of state bureaucrats will increase to EGP 268 bn in next year’s budget, up from EGP 240 bn this fiscal year, said Vice Minister of Finance Mohamed Maait, according to AMAY. The wage increases will go into effect on 30 June, he added — assuming, of course, the House approves the budget on time.

As for the state IPO program, El Garhy said the government was meeting with investment banks to decide the first of the 23 state companies slated for a listing.

Our own central bank’s Monetary Policy Committee is set to meet on Thursday to decide on interest rates. With annual urban inflation dropping to 14.4% — the lowest rate since October 2016 — the CBE has recently hinted at a possible rate cut by saying that inflation appears under control in the medium-term. Research houses have been unanimous in saying that the CBE might cut interest rates again this month, predicting a cut of 50-200 bps.

Our friends at Pharos Holding expect a 100 bps cut on Thursday. You can read Pharos’ full report here (pdf).

Presidential campaigns in pre-poll quiet period, polling stations open tomorrow with tighter security: Security at polling stations has been tightened after a terrorist bombing in Alexandria killed two policemen, according to state-owned Al Ahram. The two presidential campaigns are in a constitutionally mandated quiet period today, with voting due to begin tomorrow and end on Wednesday, 28 March. Companies are being asked to give staff sufficient time during the workday to make it to and from their polling station. Results are due to be announced on Monday, 2 April.

Wall Street closed deeply in the red on Friday, prompting fears of a fresh selloff in global markets this week. The S&P 500 fell 2.1% on Friday to close the week down 6% as China hit back at the US tariffs on some USD 60 bn worth of goods and services, sparking fears of a global trade war. All three primary US equity indices had their “worst weekly declines in more than two years,” the Financial Times notes. Beijing is urging the US to “pull back from the brink.” CEOs, including BlackRock’s Larry Fink and Apple’s Tim Cook, urged restraint.

Sound smart: Two pieces you want to read for context, both from the New York Times:Trump is “pushing the World Trade Organization toward irrelevance,” the paper writes, saying his move clearly stands as “another retreat from the postwar” liberal democratic capitalist world order and “back toward the 19th-century ways of nationalism, protectionism and great-power rivalry.”

Also worth noting as we get the week underway:

  • Goldman Sachs wants 1,000 more investment banking clients worldwide, Lloyd Blankfein says in his annual letter to shareholders.
  • The first commercial flight to Israel has crossed Saudi airspace to land in Tel Aviv on Thursday night, underscoring “the warming relations between Israel and the Saudi kingdom.”
  • The largest youth-led protests since the Vietnam era took place across the United States yesterday as students led rallies for gun control. Reuters has more on a story that is dominating front pages across the United States this morning.
  • US President Donald Trump has a new national security adviser, tapping former UN ambassador John Bolton as to replace H.R. McMaster, Bloomberg reports. Bolton is known for being “a fierce supporter of the 2003 invasion of Iraq.”
  • Elon Musk joined the #DeleteFacebook movement, taking down Tesla and SpaceX’s accounts, Reuters reports. The calls have heightened as a result of the Cambridge Analytica scandal, though some experts believe deleting Facebook may not stop it from keeping tabs of your online data.

There’s a film and comic con taking place in Dubai from 5-7 April. The actor who plays Hodor on Game of Thrones is going, as is the actor who plays Nancy Wheeler on Stranger Things.

VACATION WATCH- It’s two weeks until the Easter and Sham El Neseem long weekend. The two holidays fall on 8 and 9 April, respectively.

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