Egypt provides promising investment opportunities despite challenges: Golden Brokers

The Golden Brokers said that Egypt faces high inflation and its currency, the Egypt’s pound, depreciated almost 50% against the USD since March 2022, the country offers interesting investment opportunities.

EGX30 from the Egyptian Exchange has appreciated by about two-thirds over the past year.

Egypt is the most populous country in the Middle East and the third largest African economy, and though there are shortcomings, especially in economic freedom and the judiciary efficiency, the country shows solid chances to be the economic tiger of the region as the analysis by Golden Brokers indicates.

Egypt’s economy is the 41st largest in the world, and its gross domestic product is expected to reach $378bn this year, according to the IMF.

The gross domestic product per person (according to purchasing power parity) here is less than $17,000, which ranks Egypt 93rd in the world. “On the other hand, the lower is the basis the higher the opportunities to grow are,” said Ariff Azraei Bin Mohammed Kamal, financial analyst of Golden Brokers.

Services account for the largest share of GDP, around 55%.

The overwhelming majority are services in the tourism industry. Roughly one third of Egypt’s GDP is made up of industry, and the remaining 12% is accounted for by agriculture.

Until the outbreak of the COVID-19 pandemic, the Egyptian economy showed solid growth of around 5 to 6% per year. COVID-19 then caused Egypt’s economic decline by about 3.5% in 2020 and another 3% in 2021. Only last year brought some economic recovery to Egypt. At the same time, due to the outbreak of the war in Ukraine, Egypt experienced another external shock.

Since March 2022, Egypt’s pound has depreciated by nearly 50% against the US dollar. An acute dollar shortage has suppressed imports and caused a backlog of goods at ports, with a knock-on effect on local industry. The annual inflation surged to 25.8% in January, the highest level for five years.

However, Egypt’s relatively poor economic situation presents a number of opportunities for its economic development. Especially if the government implements the reforms, it promised the International Monetary Fund last year. “In March 2022, the government said it had begun talks for its latest financial package from the IMF, eventually confirming a $3bn loan linked to reforms that include reducing the footprint of the state in the economy,” according to Reuters.

Egypt offers the possibility to invest on the stock exchange in Cairo. The main index of the exchange is EGX30, which includes shares of 30 companies. The largest share (32.3%) is held by the Egyptian Commercial International Bank. Other banking companies, or their Egyptian branches, such as Abu Dhabi Islamic Bank or Credit Agricole, are also traded on the stock exchange. But we can also find telecommunications or industrial companies there. EGX30 has appreciated by about two-thirds over the past year.

In addition, bonds, both government and corporate, are traded on the Egyptian Exchange. There are many types of government bonds to choose from based on maturity. The lowest appreciation is offered by overnight bonds, just over 18%, while the highest yield is offered by bonds with a maturity of one to five years, at around 25%. The 10-year government bond bears interest at a rate slightly below 24% annually.