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Pharos sees Egypt on the recovery road

Cairo: Pharos Holding expected Egypt to achieve a pickup in economic activity over the next five years on more sustainable dynamics as remittances improve, tourism recovers, oil and gas production rises, and foreign direct investments (FDI) increase.
In a research entitled Egypt on Road to Recovery, Pharos expected the inflation to decline gradually to hit 14.3 percent in fiscal year 2018/2018 and 10.7 percent in fiscal year 2019/2010 on a year on year basis.
The Central Agency for Public Mobilization and Statistics (CAPMAS) previously announced that the annual inflation rate hit 15.6 percent in November 2018, compared to 26.7 percent in the same month of 2017.
On a monthly basis, the rate decreased 0.7 percent, compared to October.
Generally, Egypt targets an inflation rate of 13 percent in its fiscal year 2018/2019 budget.
We expect the CBE to keep its overnight lending interest rate at 17.75 percent in 2H FY2018/19. However, as the global monetary policy normalizes, we expect the CBE to gradually bring down its overnight lending interest rate to 15.75 percent in FY2019/20 and 13.75 percent in FY2020/21, pharos stated in its research.
The Monetary Policy Committee of the Central Bank of Egypt (CBE) kept the overnight deposit rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively, during Decembers meeting for the sixth time in 2018.
As per the current account deficit, pharos anticipated it to decrease from 2.4 percent of GDP in FY2017/18 to 1.7 percent of GDP in FY2018/19 as a result of declining petroleum trade deficit, higher tourism revenue, and higher remittances.
CBE announced previously that Egypts current account deficit for FY2017/18 that ended in June narrowed by 58.6 percent to $6 billion.
Also, the research read, We project the foreign direct investments to increase from $7.7 billion in FY2017/18 to $9.3 billion in FY2018/19 and to $9.5 billion in FY2019/20. On the other hand, the net international reserve (NIR) level should stabilize around the current levels of $44 billion in FY2018/19.
We expect NIR to improve further over our forecast horizon, mainly on tourism recovery, steady remittances and solid FDIs in oil and gas sector, it added.
FDI recorded $7.7 billion in 2017/2018,$4.5 billion of which were in the oil sector. FDI declined during last year compared to $7.9 billion in 2016/17.
According to Pharos, the primary fiscal balance is expected to improve from a surplus of 0.2 percent of GDP in FY2017/18 to a surplus of 1.1 percent of GDP in FY2018/19 and 2 percent of GDP in FY2019/20.
It also forecasted that the overall budget deficit would decline from 9.6 percent of GDP in FY2018/19 to 7.7 percent of GDP in FY2019/20.
CBE said in the beginning of December2018 that the total expenditure hit 1.229 trillion in 2017/18, bringing the total deficit to LE 432 billion, or 9.8 percent of Egypts gross domestic product (GDP).
The governments net debt is projected to decline from 100.3 percent of GDP in FY2017/18 to 89.6 percent of GDP in FY2020/21 on higher GDP growth, fiscal consolidation and improved debt dynamics on currency and tenor, according to the research.



Time Added: 2019-01-10 12:41:12
Source: arabfinance
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