Sunday 22 nd Jan. 2017 Issue #2 THE WEEKLY www.alexbank.com Egyptian Pound’s Value To Increase Against The US Dollar Moody’s Expects The Egyptian Economy To Grow By 4% In 2017 The United Bank Increases Its Capital Fixing The Customs Dollar Exchange Rate IN THIS ISSUE... A WORLD OF REAL POSSIBILITIES 1 TERMS IMF RELEASES EGYPT’S LOAN On the 18 th of January, the International Monetary Fund (IMF) released the staff report and documents related to Egypt’s three- year USD12 billion loan agreement, praising Egypt’s progress in implementing its economic reform program. A critical shortage of foreign exchange and precariously low reserves. A high budget deficit and state debt, registered 12% and 95% of GDP respectively last year. A long term structural problem of low growth and high unemployment. “On social protection, we wanted to make sure that the most vulnerable people would be protected from the initial effects of the program because there are initial costs in this kind of adjustment. One of the good things is that the budget adjustment was sufficiently strong that it frees up resources to spend on more social protection” Online Press Briefing Staff Report For Egypt Reuters 19 th January2017 The IMF confirmed that the program is designed to fix the following key problems: The main ways of solving such problems were adopting a more flexible exchange rate, introducing the Value Added Tax, cutting fuel subsidies and controlling the public sector wage bill. According to the IMF, there are further decisions to be taken by Egypt’s government such as: Introducing capital gains tax on stock exchange transactions to be effective no later than FY 2017/18, Increasing social spending on protection programs by at least EGP25 billion, ensuring that no new arrears, owed to international oil firms, are accumulated, and seeking to reach agreements with creditors on the repayment schedule of the current stock (about USD3.9 billion) to gradually eliminate it by end-June 2019.
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Sunday22nd Jan. 2017
Issue #2THE WEEKLY
www.alexbank.com
Egyptian Pound’s Value To Increase Against The US DollarMoody’s Expects The Egyptian Economy To Grow By 4% In 2017The United Bank Increases Its CapitalFixing The Customs Dollar Exchange Rate
IN THIS ISSUE...
A WORLD OF REAL POSSIBILITIES
1
TERMS
IMF RELEASES EGYPT’S LOAN
On the 18th of January, the International Monetary Fund (IMF) released the staff report and documents related to Egypt’s three-year USD12 billion loan agreement, praising Egypt’s progress in implementing its economic reform program.
A critical shortage of foreign exchange and precariously low reserves.
A high budget deficit and state debt, registered 12% and 95% of GDP respectively last year.
A long term structural problem of low growth and high unemployment.
“On social protection, we wanted to make sure that the most vulnerable people would be protected from the initial effects of the program because there are initial costs in this kind of adjustment. One of the good things is that the budget adjustment was sufficiently strong that it frees up resources to spend on more social protection”
Online Press Briefing Staff Report For EgyptReuters 19th January2017
The IMF confirmed that the program is designed to fix the following key problems:
The main ways of solving such problems were adopting a more flexible exchange rate, introducing the Value Added Tax, cutting fuel subsidies and controlling the public sector wage bill.
According to the IMF, there are further decisions to be taken by Egypt’s government such as: Introducing capital gains tax on stock exchange transactions to be effective no later than FY 2017/18, Increasing social spending on protection programs by at least EGP25 billion, ensuring that no new arrears, owed to international oil firms, are accumulated, and seeking to reach agreements with creditors on the repayment schedule of the current stock (about USD3.9 billion) to gradually eliminate it by end-June 2019.
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The Economist Intelligence Unit released a report, forecasting the Egyptian Pound’s value to increase against the US Dollar by 14% in 2017, after the sharp decline in its value since the floatation decision in November 2016. The report also expected a decrease in Egypt’s budget deficit to reach USD13.8 billion in 2017, compared to USD16.4 billion in 2016, driven by the projected hike in exports and the decline in imports, supported by better exchange rates.
“Over the last year, the dominant theme has been the US Dollar strength. This overall trend is set to continue: of the world’s 60 major currencies, we see only 12 appreciating against the US Dollar in the year ahead. Our most optimistic call is for the Egyptian Pound” Simon BaptistThe Economist Magazine Chief EditorState Information Service Website6th January 2017
Moody’s Investors Service expected in its recently published report that the Egyptian economy will grow by 4% and 4.5% in 2017 and 2018 respectively, driven by private consumption and increasing public and private investments. The report also projects the current account deficit to record 7.5% and 6% of GDP in 2017 and 2018 respectively. The debt ratio is expected to peak at 105.9% of GDP in 2017, before declining to 105.5% in 2018.
The Central Bank of Egypt (CBE) approved a capital injection of EGP2.5 billion into the United Bank to push the bank’s capital up to EGP3.5 billion, to increase the bank’s market share before offering it for sale to a strategic investor in 2017. It is worth noting that the CBE owns 99.9% of the United Bank’s shares.
The Finance Minister, Amr Al Garhy, decided to fix the customs Dollar exchange rate and adjust it on a monthly basis, instead of changing the rate every day, based on the average dollar price of the previous month to help importers better cope with pricing of their products after the floatation of the Egyptian Pound. The customs Dollar exchange rate was fixed at EGP18.5 per the USD starting from the 17th of January till the end of February. A new fixed exchange rate will be decided in March based on the average price announced by the Central Bank of Egypt.
“Despite a series of negative shocks, Egypt retains the region’s highest economic strength assessment, which reflects not only its scale but also its growth outlook compared to peers”
“This increase in the bank’s capital aims to meet the growing requests to expand in business and finance. It also targets a strategic expansion for the bank, establishing new branches and providing new products and competitive services in the market”
Press ReleaseMoody’s Investors ServiceMoody’s Website15th January 2017
Ashraf ElkadyChairman of The United BankDaily News Egypt18th January 2017
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
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EGYPT AT GLANCEEXCHANGE RATES
TB’S AUCTION
EURO
USD
91 Days 18.956%
273 Days 20.194%
182 Days 20.109%
364 Days 20.187%
Sterling Pound
Auction Date Average Yield %Maturity
15th Jan. 2017
19.96
18.78
22.85
22nd Jan. 2017
18.84
12,722 13,288 12,420 5,713 12,291
23.31
1,132 1,155 1,100 692 1,099
20.09
463 473 462 344 465
22nd Dec. 2016
18.93
23.39
19.75
21st Jan. 2016
11.07
7.81
8.49
STOCK MARKET
EGX 30
Previous**
+300 bp
+300 bp
+300 bp
4
* Average Buy & Sell Prices For CBE
22 Jan. 2017
19 Jan. 2017
22 Jan. 2017
19 Jan. 2017
2nd Jan. 2017
22.42
19.11
18.18
12,722
18.8420.09
23.31
EGX 70
EGX 100
Weight inbasket %
(Index)(January 2010=100)
November2015
November 2016 Y/Y
CONSUMER PRICE INDEX AND MAJOR COMPONENTS
Headline - All items
Food and beverages
Tobacco and related products
Clothing and footwear
Housing, water, electricity and gas
Furnishings and household equipment
Medical care
Transportation
Communications
Recreation and culture
Education
Hotels, cafes and restaurants
Miscellaneous goods and services
171.88 205.27 19.43%100%
203.81 247.63 21.50%39.92%
316.60 400.66 26.55%2.19%
130.94 156.93 19.85%5.41%
128.62 139.11 8.15%18.37%
145.02 177.75 22.57%
143.32 182.63 27.43%
3.77%
6.33%
140.79 171.70 21.96%5.68%
96.85 98.59 1.80%3.12%
179.37 209.28 16.67%
193.64 243.03 25.51%
2.43%
4.43%
219.01 246.00 12.32%
113.97 141.71 24.33%
4.63%
3.73%
INTEREST RATES
Overnight Lending Rate 12.75%15.75%
Overnight Deposit Rate 11.75%14.75%
Current*
* at November 2016 ** at June 2016
Corridor Rate 12.25%15.25%
GLOBAL COMMODITY PRICES
Brent Crude * 55.49
1,210
55.3555.45 32.18 56.82
Gold **
Wheat*** 428
1,132
403
1,197
426
1,158.84
475
1,097
406.50
13th Jan. 201720th Jan. 2017 22nd Jan. 201620th Dec. 2016 2nd Jan. 2017
Source: Bloomberg
Spot Prices
* USD/Barell ** USD/Ounce *** USD/BU
15th Jan. 201722nd Jan. 2017 22nd Dec. 2016 21st Jan. 2016 2nd Jan. 2017
Jan-16 Feb-16 Mar-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17Apr-16 May-16
6
8
10
12
14
16
18
20
22
24
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17
EGP per USD EGP per Euro EGP per Pound Sterling
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Mirna Mohsen [email protected]
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Head of ResearchEmil Eskander
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