TUE, MARCH 12 2019-theG&BJournal-Egypt is touted as a core example of economic reform success, the type of reforms a country needs to pursue to draw investors interest and investments on the scale needed to achieve ambitious targets such as boosting growth, reduce inflation and narrow its current account deficit.
The progress made so far is noted internationally. This week, Renaissance Capital Global Chief Economist, Charles Robertson ranked the reform story in Egypt the best in EEMEA and, perhaps in emerging market over all. The country’s steady progress triggered a 450-fold increase in foreign ownership of local bonds, from $0.1bn in late 2016 to $17.0bn in mid-2018.
The commitment to a more open capital market was tested in 2H18 when foreigners cut their bond holdings to $11bn in October and the enthusiasm with which the Central Bank of Egypt (CBE) handled the test is reflected in the view held by RenCap’s chief economist.
Egypt’s economic growth in 2017-2018 reached 5.4 percent, up from 4.2 percent in the previous year. The government is focused on growth of up to 8 percent for 2021-22 fiscal year. The glitch is that economists are finding it harder to make forecasts because data is hard to find, a problem that have been around for generations.
‘’There have been no GDP or balance of payments data since September, no tourism figures since July, no retail sales data at all, unrevised trade data on Bloomberg . The list of challenges to an economist is frustratingly long. It can’t be easy for the central bank either,’’ Robertson noted.
‘’The finance ministry aims to provide a better data platform this year. This is important as the IMF deal expires in November (I’m sure officials told me the last tranche of funding will come in July/August though),’’ he added.
‘’Inflows have soared once again – November data show foreigners owned $11bn of debt and 15% of outstanding T-bills. We would not be surprised if this figure at least doubled.’’
The rosy picture at play is the long list of positives outlined by the RenCap Man. GDP growth is strong, the budget deficit is coming down, interest rate cuts have resumed, subsidies are being removed, FDI covers the C/A and Egypt is doing all this when the underlying fundamentals (literacy and electricity and one of the lowest minimum wages in the world) are for the first time able to deliver industrialisation.
‘’ We think FX appreciation could be a year-long theme – we have 20% confidence in this view. Ministry of Finance, are making better data provision a priority for 2019. It is yet another example of Egypt heading in the right economic direction, ’’ he said.
In September 2018, the IMF managing director, Christine Lagarde commended Egypt’s reforms, underscoring the importance of the country’s structural reforms to achieve more sustainable growth.
Lagarde said Egypt’s economy is showing strong signs of recovery, and its economic growth is among the highest in the Middle East.
Earlier in August, Moody’s Investors Service raised Egypt’s credit outlook from stable to positive, citing progress in implementing the IMF-backed programme. The IMF deal expires in November 2019 (3Q19).