Macro Forum: The Street View


Egypt Image




The economy grew 5.4% in the 2018/19 fiscal year, with continuing fiscal consolidation weighing on activity and burdening households and business. However, improvements in tourism, manufacturing and infrastructure provided positive overall momentum for the economy. GDP growth of 5.3% and 5.4% is expected in 2018 and 2019 respectively.

In December, the inflation rate dropped to 12% year-on-year from 15.7% in November, on the back of a substantial decrease in the price of fruit and vegetables. A drop in global oil prices helped lower import prices. Good management of monetary policy and the exchange rate reforms have also played a positive role in the easing of the inflation rate. On the downside, headwinds include potential pressure on the EGP and the implementation of a mechanism, which will see the alignment of in the domestic price of 95-octane fuel to global energy prices. Inflation is expected to have averaged 14.7% in 2018 and is anticipated to moderate to 11.3% in 2019.

The fiscal deficit widened to 9.1% on a year-on-year basis for the first four months in FY 2018/19 but is expected to run at 8.4% of GDP for the full year 2018/19. However, public debt is expected to remain at more than 90% of GDP for the next 2 years with the fiscal position being weighed down by high interest payments. However, a decrease in the global oil price will result in a lower import bill for Egypt going forward. The trade deficit is expected to reach 12.5% of GDP in 2018 but will narrow to c. 11.5% of GDP in 2019. Tourist arrivals rose to 6.1m in the first half of 2018 and should reach 10.7m by the end of 2018. compared to 8.3m tourist arrivals in 2017.. Inflows from tourism revenues and remittances will have a positive effect on the current account deficit, which is expected to narrow to 2% of GDP from 2.1% of GDP. However, the December bomb attack on a minivan carrying tourists in Giza will place pressure on the nascent recovery of the tourism sector. Expected higher FDI inflows and increasing foreign debt levels will increase foreign reserves, resulting in seven months of import cover in 2019, compared to 6.6 months at the end of 2018. Foreign reserves are expected in increase from US$33.2bn in 2017 to US$41.3bn in 2018.

The EGP was stable over the quarter starting on EPG17.92 to the US$ and ending on EGP17.92 to the US$.



Real GDP Growth

Source: International Monetary Fund

Egypt FX vs FV

Source: Bloomberg Spot Price and Actis methodology for Fundamental Value


Source: International Monetary Fund