Do we should expect a “fourth devaluation” soon, ahead of the IMF’s first review of the 3 billion loan program this month

Newsletter

15 Mar 2023

Do we should expect a “fourth devaluation” soon, ahead of the IMF’s first review of the 3 billion loan program this month. Non-deliverable forwards declined for a tenth consecutive week last week — the first time that has happened since 2007 — while CIB’s London-listed global depository receipts are trading at a 14% discount to their shares in Cairo. The EGP lost about 3% of its value since the beginning of February to nearly 31.00. (Bloomberg)

The pace at which the privatization program is rolling out and the ongoing FX shortage are keeping capital flows from reentering the country
A key step to meeting the growing demand for FX and ending the import backlog, which according to Citigroup has increased to 4 billion USD from 2.5 billion USD in January. (Arab Finance)
February’s blowout inflation print will likely force the central bank into a huge rate hike when it meets later this month
Which Goldman Sachs thinks could be as large as 300 bps. Meanwhile, JPMorgan is penciling in a 200-bps increase this month and 100 bps in May, taking the deposit rate to 19.25%, its highest level in 30 years. Also, JPMorgan expects inflation to average 24.3% this fiscal year and 20.7% next year. (Bloomberg)
Egypt’s GDP growth hits 3.9% in Q2 FY 2022/23
Egypt achieved an economic growth rate of 3.9% in Q2 of the current fiscal year (FY) 2022/2023, compared to a growth rate of 8.3% during the Q2 FY 2021/2022. According to preliminary data, the country’s GDP growth has been estimated at 4.2% during the first half (H1) of the current FY, Planning Minister Hala El-Said revealed. (Bloomberg Asharq)
El-Said also noted that the Egyptian economic growth is expected to hit 4.2% by the end of this FY despite the negative repercussions of the Russian-Ukrainian crisis
Which is likely to affect the country’s economic figures during the next FY. Regarding global economic growth, El-Said pointed out that it is forecast to plunge to 2.9% in 2023, down from 3.4% in 2022 and 6% in 2021. She also added that the world’s economic growth would bounce to 3.1% in 2024, led by the developing countries' economies. (Bloomberg Asharq)
The Madbouly government is reportedly planning to sell a minimum of 10% in each of military-owned bottled drinks firm Safi and fuel retailer Wataniya
An undisclosed UAE-based strategic investor is in line to snap up a stake in Wataniya. Egypt is seeking an additional resource to support the country's budget and hopes that the intervention of strategic investors in the IPO will be a tool to improve the position of some of the IPOs. (Bloomberg Asharq)
We are not alone! Investors are continuing to dump Tunisia’s bonds, raising fears that the country could default on its debt
The sell-off has accelerated after the IMF expressed concern at recent anti-migrant comments made by President Kais Saied, which triggered a spate of attacks against sub-Saharan Africans. A loan agreement with the IMF is seen as crucial as helping the country avoid default. (Bloomberg)
US consumer prices rise 6% at tricky time for Fed amid SVB fallout
Data comes as central bank contends with broader concerns about how rising rates have affected lenders. US inflation remained hot enough to further complicate the path forward for the Federal Reserve as it contends with three bank failures and broader concerns about financial stability. The consumer price index rose 6 per cent year on year in February, following a 0.4% increase from the prior month. That is a step down from the annual 6.4% pace registered during January, though still elevated. (Financial Times)
Consequently, "We no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable #uncertainty about the path beyond March," according to Goldman Sachs
Goldman Sachs’ previous expectation was of a 25-basis point hike. “We have left unchanged our expectation that the FOMC will deliver 25bp hikes in May, June, and July and now expect a 5.25-5.5% terminal rate, though we see considerable uncertainty about the path’. (Bloomberg)
Three major US banks with heavy tech and / or crypto exposure have collapsed in less than a week
SVB and Signature Bank became the second- and third-largest bank failures in US history, sparking fears that the country’s banking system could be thrown into turmoil. In a bid to calm nerves, US authorities have taken emergency measures to cover all deposits and supply liquidity to lenders, while an intervention by President Biden yesterday pledged to do “whatever needed” to end the crisis. (Bloomberg)
Hassan Allam Utilities, Kuwaiti Agility form JV to build logistics parks in Egypt
Hassan Allam Utilities, the investment and development arm of Hassan Allam Holding, and the Kuwaiti warehousing firm Agility have formed YANMU, a joint venture (JV), to develop, build, and operate modern logistics parks and grade A warehousing facilities in Egypt. The two companies also unveiled that their YANMU East Logistics Park will be inaugurated in August. Both companies also plan to launch a second complex, YANMU West Logistics Park, in 2024. (Arab Finance)
General Motors Egypt to invest 16 million USD to locally manufacture new car models
Egypt’s distinguished capabilities in the automotive industry, especially after the government launched the Automotive Industry Development Program. 90% of General Motors Egypt’s sales in the Egyptian market over the past five years were locally manufactured. From 2018 to 2022, the company invested about 15 million USD to upgrade its factory in the country and ensure safety, productivity, and quality standards. (Arab Finance)