Egypt Country Risk Report Q1 2020

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.

Key Risks

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
SWOT
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

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