Back to the complete issue
Wednesday, 7 August 2019

Egypt’s reform have been a boon to some investors but painful to most others, says Bloomberg

Egypt’s economic reforms have been a boon to some investors but painful to most others, says Bloomberg: Last week’s Capmas announcement that Egypt’s poverty rate in FY2017-2018 rose to 32.5% from 27.8% in 2015 has Bloomberg analyzing the wider impact of Egypt’s 2016 economic reforms. While the EGP float and subsidy cuts have driven GDP growth to 5.6% (the best in the region), ended an FX shortage, and turned Egypt into a premier destination for emerging market portfolio investments, “one-third of the population lives in poverty, about double the figure at the start of the century,” note Abeer Abu Omar and Paul Wallace. “At the same time, businesses are cautious and there’s little fresh foreign investment beyond oil and gas,” they added, citing PMI data which shows business contracting in all but two of the past 11 months.

There is cause for optimism: “Still, there was an improvement in July. And the investment component of GDP rose 12% year-on-year in real terms in 2H2018,” the piece notes. “These are the side effects of the fiscal restructuring program that was kicked off in 2016, and hopefully they’re short-term effects,” Allen Sandeep, director of research at Naeem Holdings, told Bloomberg last week. He predicted a rebound as private investments and consumer demand as inflation fell to single digits from a 35% peak 2016.

Improved business climate, interest rate cuts are part of the solution: Analysts, including Sandeep, see interest rate cuts as part of a wider macro solution. “The situation is still weak and getting weaker in terms of demand, and that’s got to do with interest rates being high,” Sandeep said, adding that “private investments won’t really take off until the cost of capital drops.” “Improvements in the business environment and public-service delivery, along with interest-rate cuts, would spur further growth,” says said Omneya Ramadan, a senior consultant at Cairo-based Decode Economic and Financial Consulting.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2021 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of Commercial International Bank (tax ID: 204-891-949), the largest private-sector bank in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; and Act Financial (tax ID: 493-924-612), the leading activist investor in Egypt; and Abu Auf (tax ID: 584-628-846), the leading health foodmaker in Egypt and the region.