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Egypt Country Risk Report Q4 2018

Egypt Country Risk Report Q4 2018

Real GDP growth is set to accelerate in Egypt as exports and investment pick up – boosted by the country's fast-expanding gas sector. Non-hydrocarbon invest-ment and consumption will recover only slowly, as inflation and interest rates remain relatively elevated, keeping households and businesses under pressure.

Egypt's primary budget surplus will rise on the back of fiscal consolidation measures, however, high debt servicing costs will keep the overall budget in deficit. Despite being on a declining trend, the debt-to-GDP ratio will remain elevated, exposing the country to shifts in global investor sentiment.

The Central Bank of Egypt (CBE) will keep interest rates on hold in the near term as subsidy cuts fuel a temporary spike in inflation. We forecast just one more cut (late) this year – bringing the overnight lending rate to 16.75% – as dollar strength and rising oil prices encourage the CBE to maintain a cautious stance. We nevertheless expect the broader trend of gradual monetary easing to remain in place over the medium term, facilitated by improving fiscal dynamics and stabilising prices.

The Egyptian pound is likely to remain broadly stable in the coming months, depreciating only slightly on the back of rallying oil prices and US dollar strength.

President Abdel Fattah el-Sisi may move to extend or abolish presidential term limits in the next few years. Our core view would be for this process to pass with limited public opposition – although if matched against a backdrop of still-dire economic conditions, widespread protests could not be ruled out.

Key Risks



Political repression will fuel popular discontent and raise potential for widespread unrest in the years ahead, especially should economic improvements fall short of expectations.


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
Expanding Gas Sector To Support Egyptian Growth Acceleration
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
Monetary Policy
CBE To Err On The Side Of Caution
Monetary Policy Framework
Long-Term Decline In Inflation
TABLE: MONETARY POLICY
Fiscal Policy And Public Debt Outlook
Egyptian Fiscal Deficit To Narrow Gradually On Subsidy Cuts
Currency Forecast
EGP: Relative Stability Ahead
TABLE: FITCH SOLUTIONS CURRENCY FORECAST
Egypt Country Risk Q4 2018Contents10-Year Forecast
The Egyptian Economy To 2027
More Reform Needed Before Potential Begins To Show
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Political Outlook
Domestic Politics
Presidential Term Limit Extension Looking Increasingly Likely In Egypt
TABLE: POLITICAL OVERVIEW
Long-Term Political Outlook
Democracy Remains A Distant Prospect
Global Macro Outlook
Fewer Negative Surprises, But Trade Risks Rising
TABLE: GLOBAL MACROECONOMIC FORECASTS
TABLE: DEVELOPED STATES – 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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