Egypt to stimulate private sector’s investments: HC

CAIRO – 7 May 2018: HC Securities & Investment (HC) expects the Egyptian government to adopt a number of financial and monetary measures to stimulate the growth of private sector’s investments, especially with the slowdown of the inflation that calls for an ease monetary policy.

Chief Economist at HC Brokerage, Sara Saada, said that HC also expects the interest rate to be decreased by 800 basis points during 2018/2019, with an average rate of inflation that amounts to 13 percent in the same fiscal year and 11 percent in 2019/2020, in addition to achieving a stabilized exchange rate in the short term.

Egypt floated its currency in November 2016 to lose around 50 percent of its value.

The Central Agency for Public Mobilization and Statistics (CAPMAS) announced that annual consumer price inflation slipped to 13.1 percent in March 2018, compared to 32.5 percent in the same month of 2017.

Saada praised the decision of the interest rate cut in February and March by 100 basis points each, saying that it represents the start of the monetary ease cycle.

She anticipated that the Central Bank of Egypt (CBE) will cautiously continue the ease policy.

Saada thinks that the CBE will keep the interest rate during the third quarter of 2018, with more decisions in the fourth quarter.

The Monetary Policy Committee of the Central bank of Egypt lowered the interest rate twice this year by 1 percent each time.

On March 29, the committee set the overnight rate and the overnight lending rate at 16.75 percent and 17.75 percent, respectively. While in February, the committee lowered the interest rates by 1 percent for the first time since the flotation of the Egyptian currency in November 2016, after inflation rates slowed down.

Regarding the gross domestic product (GDP), HC expects it to reach 5.3 percent in 2017/2018 and 6 percent in 2018/2019, reaching 6.2 percent in 2019/2020.

The Chief Economist expected a primary surplus of 3.10 percent in the fiscal year 2019/2020, in light of the measures taken to rectify the current fiscal situation.

Minister of Finance Amr el-Garhy said earlier that his ministry is working on achieving a primary surplus of 2 percent of GDP by 2020 and increasing average per capita income.

Regarding taxes revenues, Saada said that HC still believes that taxes revenues will rise to 14.2 percent in 2017/2018 and to 15.2 percent in 2019/2020, up from 13.3 percent in 13.3 percent in 2017.

The Central Agency for Public Mobilization and Statistics (CAPMAS) said that taxes revenues, which include income tax and other forms of taxes, captured 82.3 percent from the total revenues in H2 of 2017/2018.

HC further expected an overall budget deficit-to-GDP of 10.1 percent in the current fiscal year, 8.4 percent in 2018/2019, and 7.1 percent in 2019/2020.