The World Bank has raised its forecasts for Egypt’s real GDP to 5.5% for 2021
For our top macro talks today, first, the World Bank (WB) has raised its forecasts for Egypt’s real gross domestic product (GDP) to 5.5% for 2021, compared to 4.5% predicted in June before hitting 6% in 2022. The World Bank expounded that the performance of oil-importing countries (OICs) in the Middle East and North Africa (MENA) has been dominated by the recovery of Egypt’s economy, which accounts for more than half of this group’s GDP. Noting that the cumulative cost of the pandemic on the MENA region’s GDP in 2021 is expected to be around 200 billion USD. It is projected the region’s GDP per capita to grow by only 1.1% in 2021 after declining by 5.4% in 2020. By the end of 2021, the region’s GDP per capita will still be below the 2019 level by 4.3%. (Source: World Bank)
- Second, Egypt monthly inflation rate rose 1.6% last September. The annual inflation rate of Egypt recorded 8.0% for the month of September 2021
compared to 3.3% for the same month of the previous year. This rise was expected due to the back-to-school season in September. We believe that the CBE will not introduce any cuts to the current interest rates throughout the end of 2021. And According to the CBE’s latest report on Egypt’s monetary policy, the “annual headline inflation rate is expected to be affected in the near-term by unfavorable base effects related to the normalization of monthly inflation rates in 2021”. (Source: CAPMAS)
- Accordingly, with this being said, the Egyptian government’s pricing committee raised fuel prices by 0.25 EGP on Friday in response to spiraling international costs.
Therefore, 95 octane has risen 2.7% to 9.25 EGP per liter, 92 octane has risen by 3.1% to 8.25 EGP, and 80 octane has risen by 3.7% to 7 EGP. It is worth mentioning that this is the third price hike in 2021. Fuel prices are now up 8.8-10.0% so far this year after price rises in April and again in July.
- Moreover, the World Bank, French Development Agency (AFD), Japan International Cooperation Agency (JICA), and World Health Organization (WHO) are set to provide Egypt with a facility worth 1 billion USD
to finance the country’s universal health insurance system. Up to 4.2 million USD out of the total sum are expected to be provided within the coming few months. Egypt’s healthcare sector proved its resilience in facing the pandemic by providing all the necessary healthcare tools to preserve public health and safety. The current project portfolio in the Egyptian healthcare sector includes 32 projects worth 1.4 billion USD that serve SDG 3 regarding good health and wellbeing. (Source: Al-Mal)
- Also, Egypt started taking steps to obtain financial facilities to issue sukuk (Islamic sovereign bonds) and green bonds to the tune of 2 billion USD.
The three-year financial facilities are needed for the public treasury to fund the budget deficit of the fiscal year (FY) 2021/2022. Egypt’s Islamic sukuk are expected to be offered in both local and hard currencies to provide cash liquidity for the Egyptian economy and decrease the cost of investments. The Islamic sukuk issuance is part of the finance ministry’s plan to diversify its base of investors who want to invest in governmental financial securities in line with the principles of Islamic Sharia. It will also allow the utilization of state-owned assets according to the beneficial right system through ownership without usufruct or renting. (Source: Egypt Ministry of Finance)
- By the same token, Egypt has signed a landmark international tax agreement following a “make or break” meeting hosted by the Organization for Economic Co-operation and Development (OECD) on Friday, October 8th.
Major reform of the international tax system finalized at the OECD will ensure that Multinational Enterprises (MNEs) will be subject to a minimum 15% tax rate from 2023. The landmark deal, agreed by 136 countries and jurisdictions representing more than 90% of global GDP, will also reallocate more than 125 billion USD of profits from around 100 of the world’s largest and most profitable MNEs to countries worldwide, ensuring that these firms pay a fair share of tax wherever they operate and generate profits. (Source: OECD)
- Moving to our companies talks, Elsewedy Electric (SWDY) has entered the Asian market through two acquisition deals worth a combined 60 million USD in the transformers sector in Indonesia and Pakistan.
The Egyptian company has recently acquired a 95% stake in PT CG Power Indonesia, a company specialized in the production of power transformers in Indonesia, with a production capacity of 10,000 volt-ampere. These transaction deals allow Elsewedy Electric to expand in Southeast Asia and Australia in line with the company’s growth plan. It is worth noting that Elsewedy Electric reported a consolidated net profit before minority interest of 1.58 billion EGP in the first half (H1) of 2021, compared to profits of 914.24 million EGP in H1-2020. (Source: Al Borsa Newspaper)
- Furthermore, the Alexandria Confectionery and Chocolate Company (Corona) aims to seize 30% market share and is studying the offering on the stock exchange.
The company revealed new investments worth about 100 million EGP, which the company intends to inject over the next two years, to be funded by the current shareholders. The company is currently exporting to Yemen, Kenya, Morocco, Libya, Saudi Arabia, Gaza, Canada and the United States, and the coming period aims to increase its exports and open new Arab and international export markets. It is worth mentioning that the company is currently receiving offers from investors to enter its ownership structure, but that there is no appetite from the company's current shareholders to enter new shareholders, as it is still in a new construction phase and is waiting for further growth. (Source: Al-Mal)
- In the same fashion, the African Export-Import Bank (Afreximbank) is currently in talks with four local banks over financing worth between $600 million and $1 billion, Afreximbank’s head of intra-African trade and corporate finance.
Afreximbank’s head did not disclose the names of the banks nor the purpose of the financing noting that the bank has renewed its 500 million USD loan with the Egyptian General Petroleum Corporation (EGPC). It is worth mentioning that the facility was disbursed by Afreximbank in 2020, alongside the National Bank of Egypt (NBE), to help the state-owned energy company finance imports of crude oil and petroleum products.
- In addition, Hochiki, a Japanese security system solutions company, intends to invest 60 million EGP this year in three markets in the Middle East: Egypt, the UAE and Kuwait.
It is worth mentioning that the company's decision to invest in Egypt is due to the fact that it is one of the few countries that has restored air traffic again, in addition to the existence of a general atmosphere stimulating foreign investments, in addition to the improvement of the country's ranking in global economic indicators, which earned it a good reputation among various countries of the world. (Source: Arab Finance)
- Finally, for our EGX talks, Pioneers Holding Company, revealed that it intends to exit one of its industrial entities during the coming period, specifically before launching the drug manufacturing activity, through its subsidiary “Noor Pharma”, which is actively distributing medicines during the current period.
It is noteworthy that "Pioneers Holding" found a plan to divide it into 3 companies, with a total issued capital estimated at 7 billion EGP, which are Pioneers Properties for Urban Development, with a capital of 4.7 billion pounds, in addition to Jadwa for Industrial Development with a capital of 2 billion EGP, and finally "Pioneers Holding", which Its name will be changed to "Aspire Capital Holding" for financial investments with a capital of 210 million EGP. (Source: EGX)
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