IIF sees Egypt growth falling to 4% in 2022 unless policymakers go for deeper structural reforms: The Institute of International Finance (IIF) sees growth in Egypt falling to 4% in 2022 from an estimated 5% in the state’s current fiscal year “due to structural bottlenecks and a less favorable global environment, including tighter financial conditions and uncertainty over the global trade system,” it said in a late October country report.

A new reform agenda? To sustain the growth rates of the past two years, policymakers will need to “make the economy more responsive to market forces and empower the private sector … Laws and regulations governing business and investment need to be overhauled and brought in line with best practices in successful emerging economies.” Among the keys: Driving exports, improving the efficiency of land allocation, strengthening competition and public procurement and cutting corruption, the IFF said, adding, “The country needs to create more freedom and space for private-sector initiative, facilitating growth of SMEs.”

No interest rate cuts before 2019: The IIF expects inflation to decline to single digits and the CBE to keep its key interest rates unchanged until it achieves its target of 13% (±3) in 4Q2018. “Once headline inflation declines to below 10% and demand pressures remain contained, the CBE may ease the monetary stance, most likely in 2019,” the report said.

Is US monetary tightening the biggest external risk to Egypt? A “faster-than-expected US monetary tightening … would hit appetite for Egypt’s eurobond issuances,” IIF writes, noting, “External risks have increased in recent months, with a shift to net portfolio capital outflows as global financial conditions have contributed to a pullback from EMs. However, Egypt’s narrowing external and fiscal deficits, falling core inflation, and adequate level of reserves will help the economy cope well with any acceleration in capital outflows.”

Public debt-to-GDP ratio in decline for the first time in a decade: The report highlights that Egypt’s public debt ratio starting to decline for the first time in nearly a decade is definitely a positive sign.It expected the ratio to start declining to “levels consistent with long-term sustainability due to high nominal GDP growth and the authorities’ fiscal consolidation plan” – which includes further reductions in fuel subsidies and more stepping up taxes.