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Thursday, 23 April 2020

Egyptian economy to grow 3.5% in FY2020-2021 –Reuters poll


Egyptian economy to grow 3.5% in FY2020-2021 –Reuters poll: Egypt’s economy will grow at a 3.5% clip in FY2020-2021, down from 5.9% in a similar poll just three months ago, according to a Reuters poll of economists. Growth for the current fiscal year will come in at 3%, a downgrade from a previous estimate of 5.8%, according to the 20 analysts polled. The economy expanded 5.6% in 1H2019-2020 but is expected to slow substantially in the second half of the fiscal year as the covid-19 pandemic causes widespread domestic disruption and the global economy enters one of the deepest recessions in living memory.

Just one respondent sees a possible recession: NKC African expects the economy to contract by 1.7% in the coming fiscal year due to “weaker consumption, investment and exports.”

Inflation to remain steady: The analysts predict that inflation will remain within the central bank’s 9% (+/-3%) target range, slowing to 6% in the current fiscal year before accelerating to 7.5% in FY2020-2021.

More rate cuts on the way? Respondents see the central bank making another 50 bps cut to its overnight lending rate by the end of June 2020, bringing it down to 9.75%. The CBE left rates on hold on 2 April, less than three weeks after the 300 bps cut, leaving its discount rate at 9.75%. The CBE’s monetary policy committee next meets on 14 May.

Fitch sees rates being left on hold: The CBE will hold off on making further cuts to interest rates for the rest of the year due to the global turmoil caused by the novel coronavirus, Fitch Solutions said in a report picked up by Al Mal. The central bank, which last month made an emergency 300 bps cut as a “preemptive” move against covid-19, will keep its foot off the pedal until 2021 as external finance tightens, the ratings agency said.

A tentative return to easing in 2021: Fitch anticipates that the CBE will take a more accommodative turn in 2021 and cut rates by 50 bps. A more aggressive cut could be in store if the economy fails to rebound as expected, it said.

Egypt to withstand corona blowback despite growth slowdown -BNP Paribas: Egypt’s stable financial sector and ample liquidity will help the economy weather the corona storm, according to BNP Paribas, which is forecasting GDP to dip to 2.6% in 2020 before recovering slightly to post 3.4% growth in 2021. Fiscal reforms over the past several years will enable the government to keep servicing debt repayments and its current account deficit, and its healthy FX reserves will support the EGP’s performance against foreign currencies and help the government to accommodate any temporary decline in foreign investment.

Stimulus package gets props: The French bank lauded the state’s EGP 100 bn stimulus package and the CBE’s 300 bps rate cut, for helping alleviate the financial burden on average citizens and limiting potential corporate losses.

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