Egypt Macroeconomic Update - August 2021
Egypt Macroeconomic Update - August 2021
Egypt Macroeconomic Update - August 2021
1 Money
Central
Market
Bank &
of FX
Egypt
Unit
Outline
2 Central
Money Bank &
Market of FX
Egypt
Unit
I. Homegrown Reform Program
3 Central
Money Bank &
Market of FX
Egypt
Unit
Main Pillars of the Reform Program
1 2 3
Inclusion Growth Jobs
▪ Higher growth and raise
potential growth
▪ Improved targeting of social
▪ Private sector-led
transfers and subsidies ▪ Enhanced Job-creation
▪ Higher productivity activities
▪ Improved quality of services ▪ Productive jobs
with a focus on tradeables
▪ Equal opportunities ▪ Higher productivity
▪ Upgrade infrastructure and
▪ Improved skills
extend to lagging and remote
areas
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Money Bank &
Market of FX
Egypt
Unit
Homegrown Reform Program
▪ Egypt developed a
comprehensive homegrown
reform program that aimed
to address the macro
imbalances that held back
Egypt’s growth potential. ✓ ✓ ✓
▪ The program consisted of Liberalization of Foreign Maintaining Financial Stability
deep structural reforms that Strong Fiscal Consolidation
would ensure a robust and Exchange Regime of the Banking Sector
stable macroeconomic
environment.
▪ In turn, Egypt then sought
the IMF’s vote of
confidence in order to prove ✓ ✓ ✓
its unwavering commitment
to reform. Reinforcing our price stability Strengthening Social Safety
Financial Inclusion
Mandate Nets
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Money Bank &
Market of FX
Egypt
Unit
II. Successful IMF Program
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Money Bank &
Market of FX
Egypt
Unit
Successful Completion of the IMF Program (2016-2019)
Egypt has successfully completed the three-year arrangement under the
Extended Fund Facility and achieved its main objectives.
As of July 24, 2019, the Executive Board of the IMF completed the final review of “The 2018/19 primary surplus target of 2 percent of GDP was met, helping to
Egypt’s economic reform program supported by an agreement under the Extended anchor a further decline in the public-debt-to-GDP ratio .”
Fund Facility (“EFF”).
“The elimination of most fuel subsidies, which are regressive,
This lead to the disbursement of the remaining USD 2 bn tranche. will encourage energy efficiency, help protect the budget from
unexpected changes in oil prices, and free up fiscal space for
Bringing total disbursement to about USD 11.9 bn social spending.”
7 Central
Money Bank &
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Egypt
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Secured Two Back to Back Programs (2020- )
Because of Egypt’s credibility and success in the first program, the IMF
was readily prepared to offer Egypt support under the RFI & SBA agreements.
Egypt was granted a request for Egypt was also granted access to a 12-
emergency financial assistance in May month SBA in June 2020, to address
2020 to meet the urgent balance of balance of payments financing needs
payments needs stemming from the arising from the COVID-19
outbreak of COVID-19. pandemic.
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Money Bank &
Market of FX
Egypt
Unit
III. External Balance
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Money Bank &
Market of FX
Egypt
Unit
NIR June 2016-June 2021 (USD mn)
▪ Post the FX regime liberalization and 50,000
reform implementation program, the
NIR jumped from USD 23.1bn in
November 2016 to reach USD 45.4 bn 45,000
by the of 2019.
Jul-21, 40,609
▪ NIR dropped slightly in March, April,
and May of 2020 on the back of a 40,000
series of outflows due to the global
pandemic.
35,000
▪ Egypt’s FX Reserves are currently
standing at a healthy level and are
expected to further improve. In fact, 30,000
as per the latest IMF forecasts,
Reserves are expected to continue this
increasing trend (reaching USD 52 bn 25,000
in June 2025) allowing for more
buffers in case of any global shocks.
20,000
15,000
10,000
5,000
10 Central
Money Bank &
Market of FX
Egypt
Unit
BoP (1/3)
Overall Balance Current Account Capital & Financial Account
2000 1,535.20 0 50% 12,000
Current Account Balance Semi-Annual Tourism Δ (RHS) Capital & Financial Account Portfolio Investment in Egypt (net)
Overall Balance showed a surplus of USD 1.5bn in Q2 The current account deficit rose by 66.9% to USD Net inflows into the capital & financial account
of FY 2020/2021, which is strongly positive. This 7.6bn against USD 4.6bn in the corresponding period increased by 75.2% to USD 9.2bn against USD 5.2bn in
surplus comes following 3 consecutive quarters of last year. This was due largely to travel restrictions the corresponding period last year. This reflects the
deficits, which followed quarters that were at low triggered by the pandemic, causing momentary large improvement in foreign portfolio investment in
surpluses prior. disruptions in the tourism sector. Egypt. Investor confidence in Egypt was exhibited once
again with easing in the global market place supporting
flows to the economy.
11 Central
Money Bank &
Market of FX
Egypt
Unit
BoP (2/3)
Remittances Oil Trade Balance Non-Oil Trade Balance
16,000 500 20,000
15,521.40 312.30
15,500 10,000
300
9,206.10 8,690.00 9,337.60
0
15,000
100
(10,000) (17,970.70) (18,073.40) (19,149.00)
14,500
14,081.50 (100) (54.20) (20,000)
14,000
13,676.50 (30,000)
(300) (27,176.80) (26,763.40)
(28,486.60)
13,500
(40,000)
(500)
13,000 (50,000)
(700)
12,500 (60,000)
1H FY19/20 2H FY19/20 1H FY20/21 (733.30) 1H FY19/20 2H FY19/20 1H FY20/21
(900)
Workers Remittances 1H FY19/20 2H FY19/20 1H FY20/21 Non-Oil Trade Balance Other Exports Other Imports
Workers’ remittances increased by 13.5% to post USD The oil trade deficit improved to record only USD The Non-Oil trade balance widened by 6.6% (USD
15.5bn compared to USD 13.7bn in the same period last 54.2mn compared to USD 733.3mn in the same period 1.2bn) to record USD 19.1bn. This was largely due to
year. The increase shows the stability and strength of last year. This was owed to a decline in oil imports, higher non-oil imports by USD 1.3bn to register USD
worker’s flows from abroad despite the concerning which reflected the slump in world prices. This 28.5bn. The rise was concentrated in the imports of
COVID-19 pandemic’s toll on global employment. outweighed previous declines in exports and helped medicines and spare parts and accessories for cars. On
Egypt record a timider deficit. the other hand, in terms of exports we saw a significant
increase in non-oil exports, largely on the back of
increased gold exports.
12 Central
Money Bank &
Market of FX
Egypt
Unit
BoP (3/3)
Income Balance FDI’s
600 520.60 421.50 123.10 8000
6000
(1,400)
(7,400) (2000)
(5,981.90) (5,568.90)
(6,314.20) (4000)
(9,400)
(6000)
(11,400)
(8000)
(13,400) (10000)
1H FY19/20 2H FY19/20 1H FY20/21 Oct/Dec-19 Jan/Mar-20 Apr/Jun-20 Jul/Sep-20 Oct/Dec-20
Income Balance Income receipts Income Payments Financial Account Foreign Direct Investment Portfolio Investment in Egypt
Income balance deficit narrowed on an annual basis by Financial account inflows improved both quarterly and
USD 347.8mn from USD 5.8 bn in the first half of FY annually, registering USD 5.3bn in Q2 of FY2020/2021,
2019/2020 to USD 5.5 bn in the first half of FY up from USD 4.0bn in Q1 of FY2020/2021 and USD
2020/2021. This was due to a fall in income payments, 4.6bn in Q2 of FY2019/2020. This was made possible
which were on the back of lower profits from foreign through stable inflows from FDIs as well as FPIs which
oil firms operating in Egypt after oil prices dropped, as increased compared to last year’s level although declined
well as lower retained earnings as they were reinvested QoQ.
in the capital of their companies.
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Money Bank &
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Egypt
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IV. Risk Profile
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Money Bank &
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Egypt
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Credit Ratings
▪ Egypt was reaffirmed by
all three Credit Rating
agencies amid an
onslaught of global
downgrades.
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Money Bank &
Market of FX
Egypt
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V. Inflation
16 Central
Money Bank &
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Egypt
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Headline Inflation
▪ CBE has successfully been able to 35.0%
lower inflation from highs greater than 33.0%
30% witnessed during mid-2017, after
the liberalization of the EGP and the
start of the Reform Program.
30.0%
▪ Annual headline inflation has
continued to record single digits since
June 2019 and has remained below 6%
since February 2020. 25.0%
20.0%
15.0%
10.0%
4.9%
5.0%
0.0%
17 Central
Money Bank &
Market of FX
Egypt
Unit
VI. GDP
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Money Bank &
Market of FX
Egypt
Unit
GDP Growth
▪ GDP was far off from a contraction 7.00%
last fiscal year despite COVID-19
shocks, evident in the fact that figures
indicate that there was a growth in FY
19/20 GDP of 3.6%. This is backed 6.00%
by strength in the communications,
real estate, and health industries.
5.00%
▪ This shows the strength of
macroeconomic fundamentals, despite
weakening tourism.
4.00%
▪ GDP growth has also shown a
sustainable rebound on the back of
support from consumption, which 3.00%
more than offset the combined
negative effect of gross domestic
investments and net exports. 2.00%
2.00%
1.00%
0.00%
Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Apr-Jun Jul-Sep Oct-Dec
16 16 16 16 17 17 17 17 18 18 18 18 19 19 19 19 20 20 20 20
-1.00%
-2.00%
-3.00%
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Money Bank &
Market of FX
Egypt
Unit
VII. Interest Rates
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Money Bank &
Market of FX
Egypt
Unit
Mid-Corridor Rate
▪ The CBE took a set of preemptive 20.00%
measures to help support domestic 19.25%
economic activity and to ease the
negative impact of the COVID-19
outbreak. These measures included
cutting key policy rates by 300 bps 18.00%
on 16th of March 2020.
12.00%
10.00%
8.75%
8.00%
21 Central
Money Bank &
Market of FX
Egypt
Unit
VIII. Financial Soundness Indicators
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Money Bank &
Market of FX
Egypt
Unit
FSI’s (1/2)
▪ Since the successful completion of the
banking sector reform program that Capital Adequacy December 2020 Asset Quality December 2020
started in 2004, the Egyptian banking
sector has exhibited great resilience
and withstood more than one crisis. Capital Base/Risk Weighted
19.5 Non-performing Loans /
▪ CBE stays abreast with the
Assets 3.6
Total Loans
international best practices to
continuously improve the quality of
banking supervision on both the micro Tier 1 Capital / Risk-
and macro levels. 17.1
Weighted Assets1
Loan Provisions / Non-
▪ The banking system remains well- 96.0
positioned to handle stress, with most performing Loans
recent data showing that, at an Common Equity / Risk-
aggregate level, the banking system is 12.6
liquid and well capitalized, with strong Weighted Assets2
profitability and asset quality. Loans to Private Sector /
60.0
▪ All soundness indicators are reflecting Loans to Customers
very healthy signs of profitability,
Financial Leverage3 7.3
liquidity and solvency.
23 Central
Money Bank &
Market of FX
Egypt
Unit
FSI’s (2/2)
Liquidity December 2020
Average Liquidity Ratio: Local Currency 49.9
Average Liquidity Ratio: Foreign Currency 77.6
LCR: Local Currency1 1071.2
LCR: Foreign Currency1 242.1
NSFR: Total Local Currency & Foreign Currency1 232.3
NSFR: Local Currency1 252.9
NSFR: Foreign Currency1 167.7
Securities/Assets2 24.2
Deposits/Assets 73.9
Loans/Deposits: Total Local Currency & Foreign Currency 48.2
Loans/Deposits: Local Currency 44.5
Loans/Deposits: Foreign Currency 70.3
Net open position in foreign currencies to Capital Base3 0.4
1Both percentages are mandatory on a quarterly basis as follows:
- LCR per local currency and foreign currencies is 90% and 100% for 2018 & 2019, respectively.
- NSFR equal to at least 100% for all currencies (local currency and foreign currencies) and per local currency and foreign currencies.
2Excluding Egyptian T-Bills
3Total net open (short or long) positions for all foreign currencies shouldn't exceed 20% of the capital base.
24 Central
Money Bank &
Market of FX
Egypt
Unit
IX. COVID-19 Developments
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Money Bank &
Market of FX
Egypt
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CBE Initiatives to Combat COVID-19 (1/2)
Interest Rate Cuts Credit Initiatives
EGP 100 billion to the industrial, agricultural, Increasing the amount allocated to support the
Cut key policy rates by 300 private construction sectors, and manufacturing tourism sector to EGP 50 billion from EGP 5 billion
basis points in March 2020. at 8% (declining interest), that has been recently with a preferential interest rate of 8% (declining
increased to EGP 200 billion. Furthermore, interest) over 15 years.
some EGP1.2 billion of the newly allocated
EGP100 billion will be allocated to finance the
rescheduling of debt for ceramic and porcelain CBE initiative to finance small enterprises whose annual
Further cuts in key policy factories that is owed to the natural gas turnover ranges from EGP 1 million up to less than
rates by a cumulative 100 companies, in accordance with the prime EGP 50 million still applies with 5% interest.
basis points in September minister’s decision, subject to several conditions.
and November 2020.
Recent guidance by the President to allocate EGP 100 billion, at 3% (declining interest) and 30-years
tenor for low- and middle-income classes.
Lifting the ban on dealing with non-performing Removing the data on non-performing individuals below a certain threshold
clients (within specific categories). (EGP 1000).
26 Central
Money Bank &
Market of FX
Egypt
Unit
CBE Initiatives to Combat COVID-19 (2/2)
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Money Bank &
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Egypt
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