EM EMEA Flash – Egypt Economic Update

Egypt Economic Update – June 2024

• Economic growth. Egypt’s economic rebalancing is now underway. This buoyancy is centred on the USD35bn front-loaded investment programme agreed with the UAE in February 2024, on the purchase of land in Ras al-Hikma on Egypt’s north coast. This funding has offered a liquidity backstop that, combined with 900bps in hikes over the last 12 months, has offered the space for devaluation and unification of the EGP, closing the parallel market and opening the way for a float.

• Inflation. Headline inflation declined from 32.5% y/y in April to 28.1% y/y in May. We do see uncertainties around near-term inflation from fiscal adjustments with respect to food and energy subsidies. Having said that, we remain dovish on the medium-term inflationary outlook.

• Interest rates. The Central Bank of Egypt (CBE) next meets on 18 July and we expect it to lower the deposit and lending rates by 100bps to 26.25% and 27.25%, respectively.

• FX view. The Egyptian Pound (EGP) still screens constructively. A strong outlook for capital flows keeps supporting the currency, which most prominently includes an increase in treasury receipts from the UAE’s investment in the Ras al-Hikma project.