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Monday, 24 June 2019

CBE to cut rates by another 400 bps by end of 2020 -HC Securities

CBE to cut rates by another 400 bps by end of 2020 -HC Securities: The Central Bank of Egypt will cut rates by 100 bps in 4Q2019 before making 300 bps worth of cuts in 2020, HC Securities & Investment writes in a report to clients. The return to easing will be a “catalyst” to stimulate private investment growth and boost economic growth to 5.9% in FY2019-2020 and 6.3% in FY2020-2021, the investment bank says.

Where is the EGP heading? HC says that the EGP remains “largely dependent” on foreign portfolio flows, and attributes the recent appreciation of the EGP against the greenback to carry trade inflows. The EGP/USD rate should stabilize over the next few months, before reversing course over the next two fiscal years, averaging EGP 17.43/USD in FY2019-2020 and EGP 18.25/USD in FY2020-2021.

Inflation: Average annual inflation will continue to decline over the coming years, finally reaching single digits in FY2021-2022 when it averages 8.4% over the 12 months, according to HC. The Finance Ministry, meanwhile, is currently projecting inflation to fall to single digit inflation (9.1%) a year earlier in FY2020-2021.

Foreign direct investment will rebound next year, rising to USD 7.8 bn in FY2019-2020 and USD 8.6 bn the year after, HC projects.

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