Economic experts view Egypt’s economy in 2018 with cautious optimism

For most of the last decade, Egypt has been squeezed between turbulence and uncertainty, and a deteriorating economy. Various challenges had to be addressed, from political unrest and declining tourism to foreign currency and fuel shortages. To correct these structural issues within the economy, the Egyptian authorities adopted an economic reform programme in 2016. Consequently, in the period between September 2016 and December 2017, authorities introduced the value added tax law (VAT), a free-floating currency, reduced energy subsidies twice, raised interest rates to curb the soaring inflation, and went on a borrowing spree from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme.

To review the results of such reforms, and get a better understanding of the future of the Egyptian economy, Daily News Egypt has conducted a survey in its annual edition with a range of economic experts and industry leaders, who shared their insights, their forecast of Egypt’s economic performance, and the main challenges and opportunities that are expected to take face the country in 2018.

The inflation versus interest rate equation

Inflation was the first side effect faced by the Egyptian economy following the economic reforms, as it skyrocketed to an all-time high of 33% a few months after the currency floatation that took place in November 2016. However, it has been declining since to reach 21.9% in December 2017.

Commenting on forecasted inflation in 2018, Alia Mamdouh, lead economist at Beltone Financial, said that she expects inflation pressures to subside with rates falling to the mid-double digits, adding that she believes that the CBE target of 13%(±3%) by end-2018 is attainable, and in turn she forecast an aggregate 400 basis points (bps) cut in interest rates in FY 2017/18.

Moreover, EFG Hermes forecast inflation to reach 14% in June 2018, after calculating the expected effect of the next wave of energy subsidy cuts, and increases in both train and metro ticket prices. Mohamed Abu Basha, a Cairo-based economist at investment bank EFG Hermes, told DNE.