Egypt Country Risk Report Q1 2020
Egypt's economy will remain strong in the near term as macroeconomic stability and eased fiscal consolidation facilitates the release of pent-up demand.
Real GDP will continue to outperform the region, hitting 5.6% in the ongoing fiscal year (ending June 30). Investment will remain a key growth driver in the near term, although as the pain of recent macroeconomic adjustments wears off, we believe private consumption will also come back to the fore.
The Central Bank of Egypt will continue to cut its key policy rate, by 50 basis points in 2019 and 150 in 2020, in response to sharply lower inflation.
The fiscal deficit will continue to narrow, hitting 7.4% of GDP in the current fiscal year, although protests in September highlighted the risk that the momentum on reform will slow.
While the long-running dispute with Ethiopia over its new ongoing dam project will be resolved diplomatically, we note that water will remain a source of conflict between the two countries (and Sudan) over the long term.
The Egyptian pound will begin to depreciate over the coming months as monetary easing weighs on portfolio investment flows and the current account widens slightly.
Political repression will fuel popular discontent beneath the surface and raise potential for widespread unrest in the years ahead, especially if the economic dividend of painful macroeconomic reforms should disappoint.
Rekindled global trade tensions could increase pressure on emerging-market assets, including the Egyptian pound, which would reduce the availability of cheap debt on international markets and possibly force the government to reassess its spending plans.
- Executive Summary
- Core Views
- Key Risks
- Country Risk Summary
- Economic Risk Index
- Political Risk Index
- Economic – SWOT Analysis
- Political – SWOT Analysis
- Economic Outlook
- Economic Growth Outlook
- Egypt Set For Robust Near-Term Growth, But Further Reform Needed
- GDP By Expenditure Outlook
- TABLE: GDP GROWTH FORECASTS
- TABLE: PRIVATE CONSUMPTION FORECASTS
- TABLE: GOVERNMENT CONSUMPTION FORECASTS
- TABLE: FIXED INVESTMENT FORECASTS
- TABLE: NET EXPORTS FORECASTS
- Monetary Policy
- Further Egypt Rate Cuts Ahead, But Easing Is A Balancing Act
- Monetary Policy Framework
- TABLE: MONETARY POLICY
- Fiscal Policy And Public Debt Outlook
- Egypt Fiscal Consolidation To Progress, But Risks Abound
- Structural Fiscal Position
- TABLE: FISCAL AND PUBLIC DEBT FORECASTS
- Currency Forecast
- EGP: Mild Depreciation In The Near Term
- TABLE: FITCH SOLUTIONS CURRENCY FORECAST
- 10-Year Forecast
- The Egyptian Economy To 2028
- More Reforms Needed Before Long-Term Potential Is Realised
- TABLE: LONG-TERM MACROECONOMIC FORECASTS
- THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS MACRO RESEARCH and is NOT a comment on Fitch Ratings’ Credit Rating. Any comments or data included in the report are solely derived from Fitch Solutions Macro Research and independent sources. Fitch Ratings’ analysts do not share data or information with Fitch Solutions Macro Research.Egypt Country Risk Q1 2020ContentsPolitical Outlook
- Domestic Politics
- Egypt-Ethiopia Dam Dispute Likely To Be Resolved Diplomatically
- TABLE: POLITICAL OVERVIEW
- Long-Term Political Outlook
- Democracy Remains A Distant Prospect
- Operational Risk
- TABLE: OPERATIONAL RISK
- Economic Openness
- TABLE: TARIFF AND NON-TARIFF TRADE BARRIERS
- TABLE: FREE TRADE AGREEMENTS
- TABLE: FREE TRADE ZONES AND INVESTMENT INCENTIVES
- TABLE: BARRIERS TO FDI
- Utilities Network
- TABLE: ELECTRICITY RISKS
- TABLE: FUEL RISKS
- TABLE: TELECOMMUNICATIONS RISKS
- TABLE: WATER RISKS
- Global Macro Outlook
- Manufacturing Weakness And Rising Political Risk To Weigh On Growth
- TABLE: GLOBAL MACROECONOMIC FORECASTS (2018-2023)
- TABLE: DEVELOPED MARKETS – REAL GDP GROWTH, % y-o-y
- TABLE: EMERGING MARKETS – REAL GDP GROWTH, % y-o-y
- Index Tables
- TABLE: EGYPT – MACROECONOMIC DATA AND FORECASTS