Market Research Logo

Egypt Country Risk Report Q1 2016

Egypt Country Risk Report Q1 2016

Core Views

2016 will be a relatively positive year for the Egyptian economy, as the currency stabilises and investment returns to the country.

The fiscal and net export position will improve significantly on the back of fuel subsidy reforms. Subsidy cuts are likely to be watered down if public unrest occurs on a significant scale. However, the bulk of reforms will remain in place.

Hikes to domestic energy prices will push consumer price inflation back into the double digits by year-end.

Egypt’s geopolitical importance will ensure that even if an IMF agreement is delayed for longer than expected, further foreign aid commitments will materialise around the turn of the year. Western powers such as the US and EU have an interest in ensuring the North African country does not experience a more pronounced economic and political crisis. However, it will be donations from the GCC which keeps Egypt afloat this year.

Parliamentary elections in Q415 will result in a fragmented legislative with minimal Islamist presence.

Major Forecast Changes

We now expect sharper depreciation in the Egyptian pound over the coming year, reaching EGP8.8000/USD by end-2016.


Executive Summary
Core Views
Major Forecast Changes
Key Risks
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Voter Apathy Clouds Democratic Mandate
The first round of the parliamentary election in Egypt was a non-event for a real return to democratic governance in Egypt as turnout
was low and all major candidates were broadly supportive of the President.
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Four Scenarios For The Coming Decade
Egypt's transition to a fully fledged democracy is likely to take several years at least and there is no guarantee it will achieve this
goal. Although the momentum for democratisation is strong, we cannot preclude a return to authoritarianism in some form. Prolonged
uncertainty and instability would be negative for economic reform, potentially undermining Egypt's appeal as an investment and tourism
destination.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Growth Outlook
Fixed Investment To Drive Expansion
Egyptian economic growth will accelerate over the coming quarters on the back of low base effects, relative political stability and
commitment to necessary economic reform.
GDP By Expenditure Outlook
TABLE: COMPONENTS OF GDP (% OF TOTAL)
TABLE: PRIVATE CONSUMPTION FORECASTS
TABLE: GOVERNMENT CONSUMPTION FORECASTS
TABLE: FIXED INVESTMENT FORECASTS
TABLE: NET EXPORTS FORECASTS
Fiscal Policy And Public Debt Outlook
Deficit To Decline, But Government Forecasts Too Optimistic
Egypt's persistently high fiscal deficit will decline over the coming years, but will fall short of the government's forecasts. Further subsidy
reform and an improving economy will result in higher tax receipts, an area which has potential for further increases with the reform of
income tax likely over the coming years.
TABLE: FISCAL POLICY
Currency Forecast
EGP - Still Further To Fall
The Egyptian pound will depreciate further over the course of 2016 as the Central Bank of Egypt's willingness and ability to support the
unit wanes. A weaker currency will bode well for investment into the country and support fragile economic growth.
TABLE: BMI CURRENCY FORECAST
Monetary Policy
Disinflation Now Over
Inflation in Egypt will head gradually higher over the coming quarters as a weaker currency increases the costs of imports. Furthermore,
we expect additional subsidy cuts in 2016 as the government tries to reduce the fiscal deficit.
TABLE: MONETARY POLICY
Chapter 3: 10-Year Forecast
The Egyptian Economy To 2024
Policy Uncertainty Weighs On Outlook
Egypt has a lot to look forward to with its many inherent advantages, including a strategic and cultural position in the world, a large and
growing population and an underdeveloped private sector providing ample room for expansion. However, the highly uncertain political
outlook poses a key downside risk to our long-term growth forecasts.
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
TABLE: OPERATIONAL RISK
Education
TABLE: MIDDLE EAST AND NORTH AFRICA - EDUCATION RISK
Government Intervention
TABLE: MIDDLE EAST AND NORTH AFRICA - GOVERNMENT INTERVENTION RISK
Chapter 5: BMI Global Macro Outlook
Global Outlook
Exit The Dragon
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES, REAL GDP GROWTH, %
TABLE: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
TABLE: EMERGING MARKETS, REAL GDP GROWTH, %

Download our eBook: How to Succeed Using Market Research

Learn how to effectively navigate the market research process to help guide your organization on the journey to success.

Download eBook

Share this report