Monthly Report August 2017 Egypt s Economic & Political Update
Monthly Report August 2017 Page 1 FOREIGN POLICY & TRADE FOREIGN POLICY & TRADE Sisi arrived China to attend the 9th BRICS Summit Egypt and Mexico agreed to establish a joint investment council Ministry of Trade and Industry exempted exports of ammonium nitrate whose nitrogen concentration exceeds 34.2% from export duties Sahar Nasr announced that a USD 60 million agreement will be signed this year with the International Fund for Agricultural Development to finance a rainwater collection in Marsa Matrouh The EU and other development partners allocated EUR 300 million to water and sanitation projects in Upper Egypt, Ministry of Trade and Industry is expecting to receive a list of products that are customsexempt under Egypt s free trade agreement with Mercosur countries The Russian industrial zone that will be developed in Port Said is expected to draw in about USD 7 billion in new investments during its three construction phases Sahar Nasr and Suez Canal Economic Zone Chairman Mohab Mamish discussed cooperation in fish farming, pharma, food industries, and shipbuilding with Vietnam s Prime Minister Nguyen Xuan Phuc STAKEHOLDERS UPDATE Mohamed Farid Saleh was appointed chairman of the EGX Mohamed Omran as chairman of the Egyptian Financial Supervisory Authority (EFSA) Mona Zobaa was appointed as the full-time Managing Director of GAFI Former local development minister Ahmed Zaki Abdeen was appointed Chairman of the New Administrative Capital Company for Urban Development Ayman El Saie was appointed as head of the Egyptian Mineral Resources Authority (EMRA) PUBLIC POLICY & REGULATIONS The new bread subsidy system comes into effect. Bakers and millers will pay for inputs at market prices in advance rather than be given access to subsidized wheat and flour with which to work. The Cabinet provisionally approved amendments to the Auctions and Tenders Act that would decentralize tender procedures and streamline the selection process for winning bids The Transport Authority raised the price of public bus tickets by EGP 0.50 The executive regulations of the Industrial Permits Act were issued. Investors will now have to deal with one government agency only as opposed to 11 before the act. The Council of State (Maglis Al Dawla) is scheduled to begin its review of the executive regulations to the Investment Act in September after the Cabinet signed off on it. The Ismail government signed off on the amended Leasing and Factoring Act that the Egyptian Financial Supervisory Authority had drafted in April The Trade and Industry Ministry plans to extend the grace period to comply with amendments to the Importers Registry Act to December from September
JUL- 15 A U G - 15 S E P - 15 OCT- 15 NOV- 15 D E C - 15 J A N - 16 FEB- 16 M A R - 16 A P R - 16 M A Y - 16 JUN- 16 JUL- 16 A U G - 16 S E P - 16 OCT- 16 NOV- 16 D E C - 16 J A N - 17 FEB- 17 M A R - 17 A P R - 17 M A Y - 17 JUN- 17 JUL- 17 Monthly Report August 2017 Page 2 OTHER MONITORED ISSUES 34% of Egyptians have begun curbing their consumption of various consumer goods, most notably food, as a result of the recent fuel and electricity subsidy cuts, according to a poll by the Egyptian Center for Public Opinion Qatar filed a complaint with the World Trade Organization (WTO) against the trade boycott imposed by Saudi Arabia, the UAE, and Bahrain The government completed EGP 5.4 billion worth of water infrastructure projects in July The Ministry of Transport has reportedly finished drafting legislation that would end the state s monopoly on rail service and allow private sector participation in building, managing, and maintaining infrastructure The Ministry of Planning has finished drafting a Unified Planning Act, which sets a framework for the state to regulate the planning and execution of national projects based on their merit and overall goals and purpose The government is drafting a three-year plan to revamp the financial and organizational structure of state newspapers and state-owned media. INFLATION Headline Inflation, computed by the Central Agency for Public Mobilization and Statistics on July 10, 2017, declined to 0.82% in June 2017 from 1.67% in May. The annual rate was mostly unchanged, recording 29.76% compared to 29.71% the previous month. Core inflation published by the CBE registered 1.8% in June 2017 compared to 1.99% in May. Annual core inflation recorded 31.95% in June compared to 30.57% in May. Headline Inflation Core Inflation 35% 30% 25% 20% 15% 10% 5% Source: Central Bank of Egypt
Monthly Report August 2017 Page 3 MONETARY POLICY In its meeting held on August 17, 2017, the Monetary Policy Committee decided to keep the overnight deposit rate, overnight lending rate, the rate of the CBE s main operation, and the discount rate unchanged at 18.75%, 19.75%, and 19.25%, and 19.25%, respectively. The National Bank of Egypt (NBE) has inaugurated the first two branches of Al-Ahli Exchange Company, established by the bank. During an interview with May Abou El Naga, Deputy CBE Governor for Supervising Banks, and Ramy Abou El Naga, Deputy CBE Governor for Monetary Markets, they stressed on the CBE s prioritization of promoting financial inclusion and shying away from cash transactions. The CBE is supporting the cause by promoting mobile payments, encouraging banks to create mini branches, and increasing internet banking. The CBE has announced that the banknote issuance to GDP % has increased to 13.42% during May 2017, recording its highest level since June 2014. The CBE stated that the total value of banknotes issued reached EGP 435.5 billion in May 2017, compared to EGP 419.7 billion in April 2017. In addition, there has been an increase in the total balances of loans provided from banks to clients in April, an increase of EGP 39 billion. The total nongovernment loans increased to EGP 1.06 trillion, including EGP 711.2 billon in local currency, and around EGP 350.7 billion in foreign. On the other hand, the total amount of loans provided to the government reached EGP 335.8 billion, including EGP 143.1 billion in local currency and EGP 192.6 billion in foreign.
Monthly Report August 2017 Page 4 NET INTERNATIONAL RESERVES For the first time since 2011, Egypt s foreign reserves registered USD 36 billion. Data from the CBE revealed that reserves increased by USD 4.7 billion during July alone. Egypt s reserves saw total inflows of USD 7.7 billion in July 2017, including USD 3.7 billion in foreign investments and USD billion from the local economy. Egypt also received a USD 1.25 billion loan from the IMF during July. In addition, over USD 13 billion have flowed into Egyptian Treasury Bills as of July 25, with yields over 22%. However, Egypt s gross foreign debt increased by 32.5%, USD 18.1 billion, in the Q3 FY2016/2017. By March 2017, Egypt s foreign debt registered USD 73.9 billion, as a result of the foreign exchange rate and the increase of USD 19.1 billion in net borrowings 40 2016 2017 35 30 25 20 16.445 15 10 5 0 USD bn 17.546 19.59 24.37 28.5 31.31 36 GDP USD bn. Source: Central Bank of Egypt The Ministry of Finance released a report stating that the budget deficit during the first nine months of FY2016/2017 has decreased to 9.5% of GDP from 11.5% during the same period a year earlier. Foreign direct investment has risen 27.5% y-o-y in FY2016/2017. During Q4 FY2016/2017 Egypt s economy grew 4.9%, compared with 2.3% in the same period in FY2015/2016. Moreover, the trade deficit has also improved during the year, dropping to 46%. Meanwhile, Egypt s foreign debt rose 38.4% to reach USD 73.9 billion by the end of March 2017, up 38% from March 2016. +13%
Monthly Report August 2017 Page 5 TOURISM Egypt s tourism revenues have increased by 170% during January-July 2017, reaching USD 3.5 billion. The number of tourists arriving to Egypt have risen by 54%, reaching 4.3 million during the same period, however the GoE is targeting 8 million tourists in 2017. The United Nations World Tourism Organization (UNWTO), reported that Egypt has become one of the world s fastest growing tourist destinations in 2017. Despite Russian and UK flights ban to Egypt since 2015, Egypt has witnessed an increase in tourist arrivals. 800,000 600,000 400,000 200,000 0 Number of Tourists 716,000 573,800 425,000 431,800 April May Source: CAPMAS Saudi Prince Al Walid Bin Talal is planning to invest in multiple construction and touristic projects in Egypt valued at USD 800 million, in an agreement reached with Talaat Moustafa Group and Sahar Nasr, Minister of Investment and International Cooperation. The investment includes expanding the Sharm El Sheikh Four Seasons, in addition to new hotels in El Alamein and Madinaty. Over 10,000 participants from 30 countries will participate in the Sharm Travel Market that will be held Sharm El Sheikh in mid-september. The conference is aimed at increasing the exchange of tourists amongst the participating countries. 1.62 1.6 1.58 1.56 1.54 1.52 1.5 1.48 1.46 1.44 bn Tourism Revenues 1.6 1.5 Jan-Mar 2016 Jan-Mar 2017 Source: CAPMAS
Monthly Report August 2017 Page 6 Suez Canal Revenues from Suez Canal have risen to USD 447.1 million in July 2017, compared to USD 427 million in June 2017. President Abdel Fattah El Sisi has approved the establishment of a joint company between Dubai Ports and the General Authority for the Suez Canal Economic Zone to execute development projects in the area. Governor of Port Said, Adel El Ghadban, has revealed plans to transform the administrative building of Suez Canal Authority, which is also known as Suez Canal House, into a historical museum. He stated that he is aiming to have it ready by the 150th anniversary of the inauguration of the canal in 2019. Law Statuses Investment Law Gas Law Consumer Protection Law Bids & Tenders Law Local Administration Law Unified Building Law Labor Law Health Insurance Law Bankruptcy Law Food Safety Law Customs Law SME Law Early Drafting Phase Mid Cabinet Approval Phase Final Pending Parliament Discussion/Approval + Presidential ratification Complete Ratified by the President