Egypt’s economy shows signs of vigour: BNP Paribas

The economic situation in Egypt has improved significantly since the flotation of the Egyptian pound in November 2016 and is showing signs of vigour. The most significant improvement was witnessed in external accounts and foreign currency liquidity. Currency reserves at the Central Bank of Egypt (CBE) have increased by 60%, reaching $31.3bn in June 2017, equivalent to covering nearly six months of importing goods and services, according to BNP Paribas’ report.

On the other hand, household consumption, one of the main drivers of economic activity, is severely constrained by rising prices. Annual consumer price inflation has been running at an average of over 30% since January.

“We believe that other elements are important explanatory factors in Egypt’s structurally high inflation and the magnitude of price rises over the last six months,” the report said.

The report cites that one of the inflation drivers are the indirect effects due to an increase in the prices of semi-finished goods and commodities, which feeds production prices and, consequently, consumer prices, as a result of the lack of many sizeable domestic manufacturers across consumer goods segments.