Goldman sachs sees sizable moves in interest rate cut in Egypt

CAIRO - 26 November 2019: US investment bank Goldman Sachs saw further sizable moves in a near-term interest rate cut in Turkey, Russia, Mexico, Brazil, South Africa, and Egypt on the back of below-potential growth and/or subdued inflation, according to its report tackling global economics.

In another report reported by local media, Goldman Sachs said that cutting interest rates in Egypt would support long-term growth rates, but the government should cut the current interest rate by 200 to 400 basis points in 2020 to stimulate private investment.

The bank said in its report that the outlook for growth in Egypt is mixed, although the economy is growing by about 6 percent annually, but depends mainly on public investment in infrastructure projects.

It predicted that the key role played by the tourism and oil sectors will continue to stimulate growth in the short term, to offset weak consumption, private investment and slow productivity growth.

Goldman Sachs attributed the restrictive movement of non-oil exports to investment rates below the required and weak competitiveness, and administrative challenges.

It further noted that the expansion of the role of the state in the economy during the past period may portend the possibility of crowding out the private sector, but at the same time considered that the announcement of the beginning of the privatization program will change that situation.

As per inflation, it expected rates to reach 9 percent by the end of 2019, driven by the impact of the base year, to be between 9 and 10 percent next year, with the possibility of a further decline in the event if the government succeeds in eliminating supply bottlenecks in various commodities, especially food.

The US investment bank said the government appears determined to reduce public debt from 85 percent of GDP to 75 percent by 2022 by trying to structure the domestic debt market by linking up with the Euroclear platform.

It also predicted that the cost of debt servicing would decline in tandem with lower interest rates, allowing the government to increase its spending on infrastructure and human capital.

“The government is seeking to reach a new agreement with the International Monetary Fund by next March,” it noted.

In another report tackling global economics,