The Egyptian pound is expected to end calendar year (CY) 2023 at EGP 34.69 per USD and end CY 2024 at EGP 36.09 per USD, according to FocusEconomics panelists.
The Egyptian pound traded at EGP 30.90 per USD on 1 September, unchanged from the previous month. However, the currency has lost about 20% of its value against the USD since the beginning of this CY.
FocusEconomics Consensus Forecast September 2023 reported that GDP grew 3.9% year on year in Q3 fiscal year (FY) 2023 (January–March 2023), matching Q2’s increase, according to the Central Bank of Egypt (CBE).
The economy performed well despite persistent challenges, but it is unclear if this momentum continued in Q4 FY 2023 (April–June 2023) and Q1 FY 2024 (July–September 2023).
Core and headline inflation accelerated further in recent months, reaching record highs in June and July, respectively. The sharp rise was partly due to the Egyptian pound’s steep depreciation against the USD this CY and a shortage of foreign currency.
The report noted that GDP growth in FY 2024 (July 2023–June 2024) will remain largely unchanged from FY 2023 as funding from the IMF and the World Bank will support the implementation of reforms and shore up investor confidence.
FocusEconomics panelists project GDP to expand 4.0% in FY 2024, which is unchanged from one month ago, and to expand 4.6% in FY 2025.
Inflation hit a new record high of 36.4% in July (June: 35.8%), more than four times the upper bound of the CBE’s 5.0–9.0% target range. Inflation will remain close to current levels for the rest of CY 2023. Average inflation will more than double from CY 2022 to CY 2023, and will likely exceed the CBE’s target until CY 2025. A weaker-than-expected pound is an upside risk.
FocusEconomics panelists forecast consumer prices to rise 33.1% on average in CY 2023, which is up by 0.9 percentage points from one month ago, and to rise 17.7% on average in CY 2024.
At its 3 August meeting, the CBE surprised markets and resumed its tightening cycle, hiking rates by 100 basis points amid surging headline and core inflation in June. The overnight deposit, overnight lending, and main operations rates rose to 19.25%, 20.25%, and 19.75%, respectively.
The next meeting is set for 21 September. Most of the panelists expect more hikes in CY 2023. FocusEconomics panelists predict the overnight deposit rate to end CY 2023 at 19.89% and to end CY 2024 at 15.97%.
The report also expected Egypt’s total investments to decrease by 14.1% in CY 2023, compared to a 16% increase in CY 2022, and then increase by 7.5% in CY 2024. Meanwhile, exports are expected to rise by 20% by the end of this CY and by 6.6% in CY 2024. Egypt’s imports are forecasted to decrease by 4% in CY 2023 and to increase by 3.3% in CY 2024.