Cairo – January 21, 2025: Despite concerns about inflation, a weakening currency, and slow structural reforms, Goldman Sachs remains cautiously optimistic about Egypt’s economic outlook.
The bank expects interest rates to decrease to 13% by year-end and believes the Egyptian pound will be "well-supported" in the short term, buoyed by factors such as stronger capital inflows and external debt issuance.
Last week, the investment bank wrapped up its investor trip to Egypt and shared its key insights in a research note obtained by Egypt Today.
The report highlights several crucial factors influencing Egypt's economic trajectory, with a particular focus on policy changes, inflation concerns, and the persistent challenges surrounding structural reforms.
According to Goldman Sachs economist Farouk Soussa, the new government under Prime Minister Mostafa Madbouly has brought a “new sense of urgency” to Egypt’s policymaking.
“The new economic team, represented primarily by the Ministers of Finance (Kouchouk), Investment (Al Khatib), Planning (Al Mashat), Industry (Al-Wazir) and CBE Governor (Abdullah), are widely perceived to have injected a new sense of urgency and coordinated thinking into policy-making that had previously been lacking,” the bank explained.
The government has been working closely with the finance and investment ministries to ease the burden on investors by reducing fees, tariffs, and other regulatory obstacles, continued the bank.
However, some businesses Goldman Sachs spoke to are still facing significant challenges, including a sharp rise in effective tax rates, with some companies reporting rates as high as 45 percent - doubling from the effective tax rate 22.5 percent - due to multiple demands for payment from as many as 67 different economic authorities.
In terms of trade, Egypt has made strides in improving port efficiency, reducing the time goods are held at ports from 14 days to just two. This improvement is seen as part of Egypt’s strategy to capitalize on Europe’s shift toward near-shoring and the broader re-routing of global supply chains.
“Some of those we spoke to operating in the external trade sector believed that, if successful, the reduction in the effective tax burden and frictions in clearing goods at ports would alleviate a significant portion of investor concerns, stimulating both domestic and foreign investment and leading to growth in exports.”
Despite these efforts, conversations with local market participants revealed continued concern about the country’s macroeconomic outlook.
According to the bank, many anticipate that the Egyptian pound (LE) will continue to weaken against the US dollar throughout 2025, with some projections forecasting an exchange rate of LE 59/USD by year’s end.
On the structural reform front, progress has been slower than expected, the report explained, particularly when it comes to reducing the state’s role in the economy and creating a level playing field for private sector players. Despite obstacles, authorities have stated that they are focused on optimizing privatization efforts according to prevailing market conditions.
Goldman Sachs also noted that Egypt’s ongoing program with the International Monetary Fund (IMF) remains on track.
Both the Egyptian government and the IMF have shown a “genuine commitment” to the program’s objectives, despite delays in the fourth review process.
“Our discussions with the Fund and the authorities confirmed that relations between the two remain good, with open and candid discussions taking place on an ongoing basis. Moreover, we perceived a genuine commitment on the part of both parties to ensure the continued success of the program,” the bank wrote.
Authorities explained that the delays were due to efforts to recalibrate certain targets to better reflect “the evolution of the macro environment (particularly the external environment) and to ensure that the commitments under the program remain relevant and achievable”.
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