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We hope you had a restful weekend. We have a short read this morning with the latest projections on Egypt’s economic growth from Fitch, and more.
But before we begin, an update from the CBE:
Confirming forecasts by most analysts polled by Reuters and other outlets, the Central Bank of Egypt (CBE) kept interest rates unchanged at its Monetary Policy Committee (MPC) meeting on Thursday. Deposit rates are still holding steady at 27.25% and lending at 28.25%.
Fitch maintains economic growth forecast for Egypt
In its country risk report for the fourth quarter of the year, Fitch maintained its forecast for economic growth at 4.2% in the current fiscal year. This comes on the back of higher investment, a recovery in the manufacturing sector, and an expected end of the war on Gaza by the end of 2024
The country’s low gas production levels and rising inflation will both impede growth and weaken the EGP further against the USD however, Fitch’s research unit “BMI” noted.
Inflation:
Inflation will continue to rise during the second half of 2024, averaging 27% YoY on the back of projections of a weaker EGP against the USD and expected fuel and electricity price hikes.
This is expected to lead the central bank to keep monetary policy tight for the rest of 2024, Fitch noted.
Inflation is expected to inch down below 20% by February 2025 due to significant base effects, and the CBE will begin its easing cycle either before or immediately after February, Fitch said.
Fitch expects inflation to stabilize at an average of 7.0% annually from 2026 to 2033.
Interest rates:
The agency expects the CBE to cut interest rates by up to 1,200 basis points in 2025 as major central banks begin easing cycles.
Account deficit:
According to the report, Egypt is also expected to reduce its current account deficit to 4.2% of GDP — USD 13.2 billion — in fiscal year 2024/25, partly on the back of higher remittance inflow, which Fitch will rise 31% YoY this fiscal year to USD 28.9 billion (c. 9.1% of GDP.)
FX reserves:
Higher capital inflows and potential government debt issuances will allow foreign exchange reserves to continue to build. Foreign exchange reserves rose to a record high of USD 46.5 billion in July 2024, and Fitch expects them to rise further in the coming months.
Exchange rate:
Fitch estimates exchange rates will see a downward trend for the rest of the year, seeing the EGP reach between EGP 47.9- 49.5 against the USD.
A shakeup in Ajwa’s management structure?
Egyptian entrepreneur Ahmed Tarek Khalil said he is mulling raising his ownership in Ajwa for Food Industries Company from 9.6% to 25%, Asharq Business writes. If successful, he plans to replace the current board, noting that the company’s profits do not mirror its expansion targets.
Remember, the company had a good 1H despite the criticism:
Ajwa recorded a whopping 440% YoY rise in standalone net profits during the first half of the year, raking in EGP 28.2 million. The company’s sales also rose 181% YoY to EGP 153.3 million during the period between January and June.
Next steps:
If there is no regular general assembly to address the issue, Tarek stated that he will take his request to the General Authority for Investment and Free Zones.
What else is clapping?
Misr Hotels will handle renovations for the Nile Ritz-Carlton Hotel in Cairo under an EGP 15.78 million contract with the government.
The Pharmaceutical Chambers Division will lobby the cabinet to launch an EGP 50 billion financing initiative to help fund domestic drug production at low interest rates, Al Arabiya writes.
Italian energy giant Eni plans to drill 3 new wells at its Zohr gas field at a cost exceeding USD 300 million under plans to increase local gas production by around 200 million cubic feet per day next January, Asharq writes. Zohr’s current daily production stands at about 1.6 billion cubic feet.
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