Egyptian economy to become more competitive among emerging markets: EFG Hermes

CAIRO, 31 Dec 2018: EFG Hermes, a leading financial services with over 880 employees in seven countries, said Monday the Egyptian economy is going to be more coherent and competitive among emerging markets in 2019 thanks to its strong bases as a result of the reform program that has been applied for more than two years.

Egypt is more capable of confronting challenges compared to other markets, Head of the group's Research Sector Ahmed Shams told MENA conditions in emerging economies can become complicated over the coming few years due to the structural crisis of foreign debts due in two years. This can become a pressure to these countries unlike the case in Egypt whose debts are not a pressing burden as the majority of them are long term ranging between 10 and 30 years, he added.

The Egyptian economy is now in a better shape compared to most of the emerging markets. Even China may face large economic problems over the coming years which makes Egypt an industrial alternative in the African and regional arenas, he said.

The Chinese economy is suffering from a sizable structural crises in terms of debts and hiking dollar exchange rate. It is also facing a large real estate bubble and rising credit rates hitting 20% of per capita income, compared with 16% in the United States prior to the financial crisis in 2008. All this makes China a huge peril that threatens the global economy and emerging nations in particular, he added.

"Egypt may benefit from the trade crisis between the US and China, the war of currencies and the eminent interest race in emerging markets. Egypt is also capable of becoming a good alternative to international investors," he added.

"We just need to repeat the Samsung Company experiment in Egypt with a number of international companies particularly in light of its potentials to become an exportation gateway to Europe, Africa and Asia," he said.

"The Egyptian economy is poised to reach a 5.2% growth rate in 2019 against 4.7% in 2018, while the Gross Domestic Product is going to rise to about $316 billion, compared with $265 billion. The deficit is expected to decrease to 9-9.5%, compared with 10.5% in 2018. The foreign debt will continue to increase within $10 billion," he expected.

"The targeted inflation in 2019 reaches 12.5%, compared with 21.6% in 2018, he said, predicting a flourishing tourism movement in the new year in light of expectations that the country will receive 11.2 million tourists, compared with the current 9.2 million. The Suez Canal revenues are expected to hit $5.6 billion, compared with the current $5.5 billion, he added.

Tourism and remittances by Egyptian expatriates have played key role in improving the balance of payment figures despite reserved expectations given incidents witnessed by the Gulf region, he said.

Revenues from tourism are expected to rise to more than $13 billion, compared with around $9.8 billion this year and between $3-4 billion during previous years, he added.

Zohr gas field is expected to provide more than an additional $2 billion after reaching its full production capacity of around 3 billion cubic meters daily, he added.

Investment rates have reached around $8 billion in 2018 which is a good rate but less than the expected, he said. However, incidents witnessed by emerging markets during the past year make these figures look good, he also said, expecting direct investment rates to hit $9.2 billion in 2019.

Egypt is moving ahead with the economic reform program and has implemented measures that exceeded those agreed upon with the International Monetary Fund, he said, pointing out that the delay in carrying out some procedures does not impact Egypt's potentials of obtaining in full the remaining $4 billion-loan installments by the fund in 2019.