Focus Economics panelists expect inflation to average 8.4% in 2020, down 0.9% from last month’s expectations, although strong economic growth should stoke price pressures ahead. So, they expect further reduction in overnight deposit rates to end 2020 at 10.61% and 2021 at 9.88%.
Inflation cooled to 4.8% in September from 7.5% in August, marking its lowest reading since December 2012, underpinned by a weaker increase in prices of foods and vegetables.
Capital Economics expects GDP to expand 5.5% in the fiscal year (FY) 2020, and 5.4% in FY 2021, which is unchanged from last month’s forecast. It also added the economy is seen slowing slightly this fiscal year on meek global economic growth, which will limit external demand growth. Solid investment growth underpinned by higher government spending and lower interest rate should cushion the slowdown.
Regarding currency, although strengthening significantly this calendar year, the Egyptian pound is seen depreciating going forward, partly as the CBE is expected to continue easing monetary policy. Capital Economics predict the Egyptian Pound ending CY2020 at EGP17.30/USD and CY2021 at EGP18.23/USD.
In terms of total investments, Capital Economics expect them to grow 11.6% in FY 2020, which is up 0.1% points from last month’s forecast, and 10.2% in FY 2021.
The Purchasing Manager Index (PMI) rose slightly to 49.5 in September from 49.4 in August. Nevertheless, the PMI remained below the 50 mark that separates contraction from expansion for the second month in a row. Going forward, businesses grew less confident about the operating outlook in September, with confidence falling to the lowest level since October 2016.
In the MENA region, Economic growth is set to accelerate notably in 2020 underpinned by expected increase in oil production. Moreover, inflation in MENA will decline in 2020 compared to this year on the back of sizable dis inflationary pressures in Egypt and Iran, although there has been a rise in global inflation due to stronger economic growth.
