Arab Finance: In light of the latest Egyptian macroeconomic developments and geopolitical turmoil, the Financial Research Department of HC Securities and Investment Company expects that the Monetary Policy Committee of the Central Bank of Egypt will fix the interest rate at its meeting scheduled to be held on Thursday, November 21, 2024, according to the report sent on November 17.
Heba Mounir, macroeconomic analyst at HC, said: “Egypt witnessed stability in its external position and even improvement in some indicators, including: 1) Net foreign exchange reserves increased by about 205 million US dollars on a monthly basis in October to 46.94 billion US dollars from 46.737 One billion US dollars in September 2) The position of the Egyptian banking sector’s net foreign currency assets increased by 6.0% on a monthly basis to 10.3 billion US dollars in September, compared to the position of the net liabilities of the banking sector in foreign currency amounting to 26.8 billion US dollars in the same month of The previous year and 3) the one-year Egypt CDS value index fell to 349 basis points currently, from 857 basis points on January 1.
In terms of economic activity, Egypt's Purchasing Managers' Index rose slightly to 49.0 in October, after recording 48.8 in September, remaining below the 50.0 level, indicating a continued lack of growth in the non-oil sector in Egypt. However, the subcomponents of the PMI calculation showed mixed indicators, as only the production and new orders components caused the index value to remain below the 50.0 level. Although the inflation rate decreased in October to 26.5%, that is, less than our expectations of 28.5%, despite the increase in gasoline prices by 11-13% and diesel prices by 17% in mid-October, we expect inflationary pressures to continue, as it is expected to witness November The full impact of the energy price increase. We also see that the volume of flows benefiting from spreads in Egypt remains attractive given the lack of expectations of a significant decline in the value of the Egyptian pound until the end of the year and in 2025, and our estimates of a positive real interest rate of 2.9% on the average yield on Egyptian 12-month treasury bills. The latter of 26.241%, (after deducting a 15% tax rate for European and US investors and based on our forecast of the 12-month average inflation rate of 19.4%). Therefore, given the inflationary pressures and Egypt's expected external debt repayment requirements in November of approximately US$4 billion based on the news, and its repayment of US$1 billion of its dues to foreign oil companies in November, we expect the Central Bank of Egypt to leave interest rates unchanged at its meeting. Next scheduled for November 21. “
It is worth noting that the Monetary Policy Committee of the Central Bank of Egypt kept the interest rates for overnight deposits and lending unchanged at 27.25% and 28.25%, respectively, at its meeting on October 17, after it had raised the interest rate by 600 basis points in March 2024, bringing the increase to The interest rate has been raised to 1,900 basis points since the committee began the monetary tightening policy, represented by 300 basis points in 2022, 800 basis points in 2023, and then 800 basis points in 2024.
The Egyptian annual inflation rate accelerated to 26.5% on an annual basis in October, compared to 26.4% on an annual basis in September, according to data issued by the Central Agency for Public Mobilization and Statistics.
Monthly prices increased by 1.1% m/m compared to a 2.1% m/m increase in September.
At the global level, the US Federal Reserve lowered the interest rate by 25 basis points to 4.50-4.75%, meaning a total reduction of 75 basis points, after it had raised the rate by 525 basis points since the start of the monetary tightening policy in 2022.
The ECB also cut the ECB's main refinancing rate and the interest on its marginal lending and deposit facilities by 25 basis points in October to 3.40%, 3.65% and 3.25%, respectively, for a total cut of 75 basis points after it had raised interest by 250 basis points. basis point since the start of monetary tightening in 2022.
Related news
