Egypt will see net capital inflows of between USD 12 and USD 15 bn by the end of the current fiscal year, the Institute of International Finance (IIF) said in a research note (paywall). Inflows will remain positive through to the end of June as foreign investment into government treasuries has notably increased since January, the IIF concluded. “Egypt has weathered recent capital outflows,” it noted, referring to the USD 10 bn in outflows suffered during the April-December 2018 Emerging Markets Zombie Apocalypse. The recovery continued into February and was further supported by the recent USD 4 bn eurobond issuance. The institute predicts additional issuances worth some USD 3 bn before the year-end.

IIF sees the economy growing at a 5.5% clip in 2019, current account deficit narrowing to less than 2% of GDP: The IIF expects GDP growth to accelerate to 5.5% this year, supported by a shrinking current account deficit to less than 2% of GDP. A continued, steady decline in public debt-to-GDP is also on the cards amid the pickup in growth and “gradual fiscal consolidation.” Other promising indicators include the EGP’s recent appreciation against the USD, Egypt’s healthy foreign reserves position, and a good supply of USD by state-owned banks. That said, the EM selloff caused the consolidated balance sheet of commercial banks to witness a USD 11.3 bn reduction in net foreign assets, leading to a net foreign liability position by the end of 2018.

Work needed to attract non-oil FDI: The government has to do more to attract non-energy foreign direct investment (FDI) to support manufacturing and exports. Egypt has trailed behind other emerging markets in growing its ratio of merchandise exports to GDP. This was reflected in the sharp USD 1 bn y-o-y slump in FDI revealed in the recent central bank balance of payments report, which contributed to the BOP entering a USD 1.77 bn deficit in 1H2018-19.