Egypt’s GDP growth seen slowing to 5.5% in current fiscal year: poll

Egypt’s non-oil private-sector activity contracted for the second consecutive month in June, according to the Emirates NBD Egypt Purchasing Managers’ Index. (AFP)
Updated 24 July 2019
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Egypt’s GDP growth seen slowing to 5.5% in current fiscal year: poll

  • Egypt’s economy has struggled to attract foreign investors since the 2011 uprising that ended Hosni Mubarak’s 30-year rule
  • Egypt’s non-oil private-sector activity contracted for the second consecutive month in June

CAIRO: Egypt’s economic growth is expected to slow to 5.5 percent in the fiscal year that began this month, below the government’s target, and 5.8 percent the following year, a Reuters poll showed, as Cairo nears the end of an IMF-backed economic reform program.
The forecasts were similar to a Reuters survey of economists released three months ago but fiscal 2019/20 growth was seen lower than the government’s target of 6 percent.
Prime Minister Mostafa Madbouly said last week Egypt’s gross domestic product (GDP) grew 5.6 percent in the 2018/19 fiscal year, a bit higher than the 5.5 percent expected in the April Reuters poll.
Barring the oil industry, Egypt’s economy has struggled to attract foreign investors since the 2011 uprising that ended Hosni Mubarak’s 30-year rule.
Egypt’s non-oil private-sector activity contracted for the second consecutive month in June, according to the Emirates NBD Egypt Purchasing Managers’ Index (PMI). Private-sector activity has expanded in only five months over the last three years.
“Even as leading economic indicators point toward weak consumer spending and stress on local firms, rising investment and government spending are supporting higher economic growth,” said Nadene Johnson, an economist at NKC African Economics.
“Medium-term growth prospects remain promising thanks to the natural gas sector and higher investment, while consumption is expected to recover following the completion of inflationary reforms.”
Earlier this month, Egypt introduced its latest round of fuel subsidy cuts, raising prices by 16-30 percent, as it nears the end of the IMF program.
Scaling back fuel subsidies that have been a strain on the budget for decades was a key plank of the three-year, $12 billion reform package signed with the International Monetary Fund in 2016, as Egypt’s economy struggled to recover from the turmoil that followed the 2011 uprising.
Other reforms included a sharp devaluation of the Egyptian pound and the introduction of a value-added tax.
“Rising fuel and electricity prices in association with energy subsidy reforms will keep inflation elevated in the coming months,” Johnson said. She expects the Central Bank of Egypt (CBE) to cut rates by 100 basis points in the fourth quarter of 2019.
Median forecasts from the poll showed predicted 5.8 percent GDP growth in the fiscal year ending in June 2021 and 5.5 percent in the 2021/2022 fiscal year.
To fuel growth, “interest rates need to be cut by at least 300 basis points,” said Allen Sandeep, head of research at Naeem Brokerage.
“And hopefully, that would increase spending and investments, and also ease the tightness in liquidity which we are currently witnessing,” he said.
The new consensus sees Egypt’s urban consumer inflation at 13.0 percent in the 2019/20 fiscal year, down from the 14.2 percent predicted three months ago for the prior fiscal year.
Annual urban consumer price inflation plunged unexpectedly to 9.4 percent in June from 14.1 percent in May, before fuel prices were raised.
Analysts expect headline inflation to decelerate to 10.9 percent in the 2020/21 fiscal year and 9.0 percent in the 2021/2022 fiscal year.
Core inflation, which strips out volatile items such as food, fell to 6.4 percent in June from 7.8 percent in May.
Millions of Egyptians live below the poverty line and struggle to meet basic needs. They have faced rising costs since the pound was devalued in November 2016.
Angus Blair, chairman of business and economic forecasting think-tank Signet, said Egypt’s inflation has long been higher than global averages.
“There has been some success in bringing the inflation rate down,” he said.
“But concerns will remain around food price inflation pressures, particularly due to potential temperature changes affecting agricultural supplies within Egypt and globally.”


Lebanon’s Jammal Trust Bank forced to close by US sanctions

Updated 19 September 2019

Lebanon’s Jammal Trust Bank forced to close by US sanctions

  • Jammal Trust Bank is accused of helping to fund the Hezbollah movement in Lebanon
  • The bank has 25 branches in Lebanon and representative offices in Nigeria, the Ivory Coast and Britain

BEIRUT: Lebanon’s Jammal Trust Bank has been forced to wind itself down after being hit last month by US sanctions for allegedly helping to fund the Iran-backed Hezbollah movement, the bank said on Thursday.
The central bank said the value of the bank’s assets, and its share of the national deposit guarantee body, were “in principle enough to pay all deposits and commitments.”
Jammal Trust Bank denied the US allegations in August after the bank and its subsidiaries were hit with sanctions, accused of helping to fund the Hezbollah movement in Lebanon.
“Despite its sound financial situation ... and its full compliance with banking regulations, the (bank) was forced to take the decision to liquidate itself in full coordination with the central bank,” Jammal Trust said in a statement.
The bank has 25 branches in Lebanon and representative offices in Nigeria, the Ivory Coast and Britain, its website says.
It is a relatively small lender, with net assets of 1,600 billion Lebanese pounds ($1 billion) at the end of 2017, according to the annual report on the latest year for which data is available.
Washington has sought to choke off Hezbollah’s funding worldwide, with sanctions among a slew of steps against Tehran since US President Donald Trump withdrew last year from a 2015 international nuclear deal with Iran.