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Economic experts view Egypt’s economy in 2018 with cautious optimism  - Daily News Egypt

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Economic experts view Egypt’s economy in 2018 with cautious optimism 

For most of the last decade, Egypt has been squeezed between turbulence and uncertainty, and a deteriorating economy. Various challenges had to be addressed,  from political unrest and declining tourism to foreign currency and fuel shortages. To correct these structural issues within the economy, the Egyptian authorities adopted an economic reform programme in 2016. Consequently, …


For most of the last decade, Egypt has been squeezed between turbulence and uncertainty, and a deteriorating economy. Various challenges had to be addressed,  from political unrest and declining tourism to foreign currency and fuel shortages. To correct these structural issues within the economy, the Egyptian authorities adopted an economic reform programme in 2016. Consequently, in the period between September 2016 and December 2017, authorities introduced the value added tax law (VAT), a free-floating currency, reduced energy subsidies twice, raised interest rates to curb the soaring inflation, and went on a borrowing spree from the International Monetary Fund (IMF), the World Bank, China, and others to finance its ambitious programme.

To review the results of such reforms, and get a better understanding of the future of the Egyptian economy, Daily News Egypt has conducted a survey in its annual edition with a range of economic experts and industry leaders, who shared their insights, their forecast of Egypt’s economic performance, and the main challenges and opportunities that are expected to take face the country in 2018.

The inflation versus interest rate equation

Inflation was the first side effect faced by the Egyptian economy following the economic reforms, as it skyrocketed to an all-time high of 33% a few months after the currency floatation that took place in November 2016. However, it has been declining since to reach 21.9% in December 2017.

Commenting on forecasted inflation in 2018, Alia Mamdouh, lead economist at Beltone Financial, said that she expects inflation pressures to subside with rates falling to the mid-double digits, adding that she believes that the CBE target of 13%(±3%) by end-2018 is attainable, and in turn she forecast an aggregate 400 basis points (bps) cut in interest rates in FY 2017/18.

Moreover, EFG Hermes forecast inflation to reach 14% in June 2018, after calculating the expected effect of the next wave of energy subsidy cuts, and increases in both train and metro ticket prices. Mohamed Abu Basha, a Cairo-based economist at investment bank EFG Hermes, told DNE.

The same optimistic forecast was shared by FocusEconomics Egypt’s economist Oliver Reynolds who said that he expects inflation to average 13.5% in Q4 2018, and expects interest rates to end the year at 14.41%.

In this context, CEO and managing director of Al-Tawfeek Leasing Company, expects that both rates will moderate in 2018 due to currency stability. However, both will remain high by historical standards due to the impact of currency liberalisation, supply deficits, subsidy reduction, and the imposition of the VAT.

Also, CEO and managing director at Elsewedy Electric Ahmed Elsewedy agrees with Beltone and Al-Tawfeek’s economists, expecting that the inflation rate should go down further, while the interest rate should also decline by around 3%.

Furthermore, Noaman Khalid, macroeconomist at CI Capital Asset Management (CIAM), expects a 3-4% cut in interest rates throughout 2018, which would bring the interest rate corridor (policy rate) to around 16% by end of this year. He added that inflation will continue to be affected positively by the base effect with a possibility of reaching 16% by the end of 2018 in the case of further subsidy cuts, mainly fuel.

Meanwhile, Fitch Ratings panellists expect inflation to average around 13-14% in 2018, ending the year within the CBE’s inflation target of 13% (±3%).

For her part, Arqaam Capital’s senior economist Reham El-Desoki said that she expects headline inflation in January 2018 to reach 18%, falling to 12% in Q2 2018, and around 10-11% in Q3 2018, even after accounting for the effect of higher energy prices, which would be in line with the CBE target of 13% ±3% by Q4 2018. She added that Arqaam Capital expects a gradual loosening to occur to avoid any emergence of significant inflationary pressures with higher liquidity after certificate of deposit (CD) rates are cut and the potential pick up in tourism. El-Desoki believes that the CBE would need to decide on why it would cut interest rates, not vice versa, at this point.

On the other hand, Alaa Ezz, secretary general of the Federation of Egyptian Chambers of Commerce (FEDCOC) and vice president of the Euro-Mediterranean Trade and Services Union, expects that the CBE will decrease the interest rate by 3-4% gradually.

With regards to the inflation rate, Ezz expects that inflation will decrease to reach its normal average in Egypt of about 10% by 2019, but in 2018, he thinks it will stabilise at about 14-15% after the first three or four months, as the effects of the currency floatation that caused the rise in inflation diminish.

Omar El-Shenety, economic expert and managing director of Multiples Group investment bank, agrees with Ezz that the CBE will reduce the interest rate gradually. However, he disagrees with him on the percentage as he expects that it will decrease by 2-3 % maximum because inflation remains high. Thus, the CBE will not significantly decrease interest rates as that would lead hot money investments to escape the public debt market.

Moreover, El-Shenety expects that the average level of inflation in 2018 will be within 20% and 25% as a result of the measures that will be implemented, such as abolishing subsidies, thus increasing prices.

On the other hand, Gamal Bayoumi, president of the Arab Investors Union (AIU), expects that the inflation rate to decline, yet he does not believe that interest rates to decline before the beginning of 2019.

In terms of interest rates, Pharos Holding economists expect that the CBE will gradually bring down the overnight interest rate to 17.25% in FY 2017/18, to reach 15.5% by FY 2018/19.

To sum it up, almost every participant forecast inflation to fall to around the 14% range in 2018, and a gradual decrease of 2-4% in interest rates.

Can GDP growth turn the tide for Egypt’s economy in 2018?

It is very clear that the current growth rate in Egypt is not yet sufficient to achieve the aspirations of the Egyptian people. At the start of the economic reform programme, authorities announced a very ambitious target of 7% GDP growth rate. However, such target proved unrealistic despite the increase witnessed in GDP. DNE survey participants shared their predictions and forecasted growth for 2018.

Moody Vice President and Senior Analyst Elisa Parisi-Capone forecast that Egypt’s growth would accelerate from 4.2% in 2017 to about 4.4% in 2018, around 5.0% by 2019, and 5.5% by 2021, as structural reforms support more broad-based activity compared to the mostly consumption-driven pre-reform growth model.

While, FocusEconomics’s Reynolds believes that growth in FY 2018 should pick up slightly and reach 4.4%, thanks to a strong expansion in fixed investment and a fortified external sector.

On the other hand, FEDCOC’s Ezz has a far more optimistic forecast, as he expects that the growth rate will reach about 5-5.5% in 2018. In his point of view, the infrastructure, services, and tourism sectors would be the main drivers behind such growth.

Also, Fahmy agrees with Ezz that the main sectors that will lead the growth are infrastructure and tourism, as well as construction and energy. He expects that the growth rate will reach 5% in 2018.

Gamal Bayoumi from the AIU agrees with Ezz that the growth rate will pass the 5% mark and that it may even reach 5.5%, expecting that the most important sectors that will lead the growth are tourism and construction, followed by the banking, agriculture, and industrial sectors.

Furthermore, Elsewedy, who is also head of the ECBC (Egyptian Chinese Business Council) and head of Egypt Ethiopia Business Council, forecast that economic growth will be at 5%. However, he has a different opinion about the main sectors that will lead the growth as he believes that the petrochemicals, pharmaceuticals, and industrial sectors will lead such growth.

On the other hand, Noaman Khalid of CIAM expects that growth will be driven by the same sectors that caused the growth rate to increase previously, which are agriculture, energy investments, retail activities, and manufacturing investments, expecting that the annual growth rate should be around 4.8-5%.

“As stagnation fades, we expect economic growth to pick up in FY 17/18, up from the 4% growth over the past couple of years,” Beltone’s Mamdouh said.

Meanwhile, El-Desoki believes that GDP growth will continue its gradual recovery path, to register at 4.5% in FY 2018, 5.5% in FY 2019, and 6.2% in FY 2020, with consumer and corporate demand recovering more in Q4 2018 as the effect of the last of the major fiscal changes tapers off and tourism and FDI pick up.

Moreover, El-Shenety said he expects the growth rate will be about 5-5.5% due to the return of Russian tourism to Egypt and due to the competitive advantage of exports after the pound’s floatation.

Fitch believes that we must forecast stronger GDP growth in FY 18, at 4.8%, as the exchange rate adjustment beds in and gas production increases.

Pharos Holding shares the same optimistic forecast as Fitch, as it expects GDP growth to record 4.7% in FY 2017/18 and to increase to 5.7% in FY 2018/19, adding that tourism recovery will be one of the main drivers behind the growth.

Finally, Keiko Honda, executive vice president and chief executive officer of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), is forecasting GDP growth to accelerate to 4.9% in 2018 and 5.6% in 2019, as a result of the experienced strong industrial production, investment, and exports, supported by the effects of the exchange rate devaluation on competitiveness.

In conclusion, all parties surveyed agree that growth will increase in 2018, however, the actual growth rates forecast range between 4.5-5.5%, which remains short of the 7% mark targeted by the government.

The devil in the FX; dollar value against EGP expectations

Although foreign exchange (FX) is not the only indicator for assessing an economy; historically, Egyptians have treated the FX rate as the indicator of choice when evaluating the economy. Following the CBE’s decision to free float the currency, the Egyptian pound lost more than half of its value and currently stays in the range of EGP 17.6-17.8 against the US dollar.

Ezz, from FEDCOC, told Daily News Egypt that he believes that the dollar value will be wobbling, decreasing to reach about 13-15 per EGP then it will increase again. However, he believes it will balance out after the first half of 2018 or by the end of the year to reach EGP 14 per dollar.

Meanwhile, El-Shenety agreed with Ezz that the dollar value will be unstable, saying it will decline slightly in the first two or three months of 2018, noting that it is already beginning to slightly decline nowadays.

El-Shenety added that he expects that it will continue declining until mid-year. However, it will rise again, exceeding the EGP 18 per dollar by the end of 2018, which is the current average.

Also, Tarek Fahmy, CEO and managing director of Al-Tawfeek Leasing Company, said that the dollar value will decline slightly, as a result of declining imports, increasing exports, and the improvement of the tourism sector.

Furthermore, Ahmed Elsewedy expects that the dollar value will reach around EGP 17-17.5 in FY 2018. Meanwhile, CIAM’s Khalid expects that the dollar value will stay within the range of EGP 17-18 per US dollar, explaining that the recent recovery in tourism and remittances will be offset by a pent-up demand from the industrial activity that will start to increase as the CBE starts cutting interest rates moving forward, and companies will start their capital expenditure cycle, thus the imports of machinery and capital goods will also increase.

“We see 2018 reaping the fruits of the ground preparations and adjustments seen over 2017 that allowed for a strong reserve being built up. This will allow the local currency to strengthen, particularly with the success in reducing outstanding liability in FY 17/18, which provides a breather to pressures on the local currency,” said Alia Mamdouh, lead economist at Beltone Financial.

Furthermore, AIU president Bayoumi said that the dollar value will be within the average stability range, expecting that it may decline to EGP 15 per USD.

 

On the other hand, Pharos Holding economists forecast the pound’s exchange rate to record EGP 17.3 per USD in the second half of FY 2017/18 and to increase to EGP 18.6 per USD in FY 2018/19, due to unfavourable global monetary tightening.

Egypt’s FDI inflows forecasts

Egypt’s longer-term FDIs and portfolio investment have increased significantly after the currency floatation, yet they do not truly reflect the full potential of the Egyptian market. Our survey respondents offered different points of view on FDIs forecasts.

FDIs would increase due to the influence of currency liberalisation and the prevailing political stability. In addition to that, Egypt is an attractive country in terms of its geographical position, said Al-Tawfeek’s Fahmy.

Meanwhile, Elsewedy agrees with Fahmy that FDIs should increase, benefiting from the cheap price we had after the pound floatation.

On the other hand, El-Shenety disagrees with them, expecting that FDIs will not exceed the $10bn again. It may increase one or two billion, but it will not witness a significant increase. El-Shenety thinks that foreign investors focus in 2018 will be to buy treasury bills rather than investing in long term foreign investments.

He added that the most important sector attracting investment is the oil and gas sector because the most recent investments were in this sector, especially after the discovery of the mega Zohr field.

In this context, El-Desoki expects that FDIs will reach $10bn in 17/18 and $12bn in18/19.

In contrast to El-Desoki, Ezz expects that 2018 will witness a boom in investments, expecting that it will surpass the $12bn not because Egypt is attractive to the investments but because it will be the accumulated result of the past years’ reforms. He explained that plenty of investors were waiting since 2016 to invest in Egypt, meaning that in 2016 they waited for the pound floatation, then in 2017 they waited the new Investment Law. Those companies and investors began to conduct their feasibility studies in the last quarter of 2017. This is why 2018 will witness a great increase in the investments.

On the other hand, Khalid from CIAM said that FDIs would only increase starting from the second half of the year (post-June 2018), after the presidential election, and the expected cut in interest rates before they start pouring in their investments.

Khalid added that he thinks that it will stay within the same range of $7-9bn, probably controlled by the energy investments also, adding that the major uptick would be in 2019.

“A stable FX market diminishes repatriation risk keeping other sources of foreign currency inflows solid, particularly portfolio investments, and FDIs, the new investment law along with continued reform to the business climate, all of which will drive FDI inflows,” Beltone’s Mamdouh expects.

While MIGA’s VP Keiko Honda sees an increasing interest by foreign investors in Egypt this fiscal year (ending in June 2018).

Moreover, AIU president expects that FDI will increase in 2018, especially investments originating from the Arab region, explaining that Arabs started to return to invest in Egypt again. “It is not difficult for FDI this year to break $10bn again,” Bayoumi assured.

What does Egypt need to do to keep the money flowing into its economy and increase investments?

Ezz said that the main obstacle for investments in Egypt, whether in industry, tourism, real estate, or in any other field, is the lack of available land, assuring that the new Investment Law did not solve the complexity of land ownership. Adding that there are two types of investors: local investors who require reducing the interest rate and foreign investors who need translating legislation into procedures on the ground.

On the other hand, Fahmy and Elsewedy agree that the main obstacle is bureaucracy. They both highlighted the importance of eradicating bureaucracy, restructuring all entities that facilitate the business environment, and improving transparency, as well as implementing more tax reforms.

For his part, El-Shenety said that the Egyptian market is still not attractive to FDIs as a result of the risks that exist in the region because of political uncertainty.

Investors need a stable political situation in the region generally, and in the country especially; low or reasonable interest rates; and they need to see the recovery of the purchasing power, he added.

Moreover, he explained that the Egyptian market was characterised by high domestic consumption. However, since the floatation of the pound, local market consumption has been limited due to the erosion of purchasing power.

On the other hand, Khalid said that the main obstacle is that Egypt does not know which type of investments it needs and the second obstacle is that the government offers incentives that do not work any more, such as tax cuts.

Bayoumi said that he believes that investors need more stability with regards to legislation and economic conditions.

Will authorities continue their strict adherence to the IMF programme in 2018?

All survey respondents almost unanimously agreed that the Egyptian authorities should and will strictly adhere to such reforms for different reasons.

Mamdouh said, “for the first time in decades, Egypt witnessed a highly persistent will to implement wide structural reforms despite the rising social factor in the decision-making process.” She explained that bold measures which were taken during the last year of Al-Sisi’s presidential term confirm a reform-oriented regime that capitalised on public consent following efforts to initiate a transparent public dialogue.

For his part, Fahmy said that the government will stick to the reforms in order to restore confidence in the Egyptian economy and spur growth.

Moreover, Khalid explained that the IMF demanded several requests since the start of the programme, and the Egyptian government adhered to them, even though some of them were not mentioned in the programme, such as the 4% hike in rates during May and July, abolishment of all foreign currency capital controls, liberalisation of all utility prices, and finally, the phasing out of the CBE repatriation mechanism, which is happening now.

Khalid added that the IMF is the lender and the godfather of the programme and has great influence over other international bodies (multilateral institutions, investors, and global banks).

“There is no option but to continue to adhere to the IMF programme and to IMF surprises. This will stay as a fact and will only change when Egypt’s economy becomes more strong and stable,” Khalid assured.

“I believe there is no turning back on our deal with the IMF and the government is expected to keep cutting public expenses and rebalancing its budget,” El-Shenety said.

Ezz agrees with Khalid and Elsewedy, explaining that the adherence is linked to loans, meaning that the IMF will not guarantee the remaining portions unless it ensures that Egypt is implementing and completing the economic reforms.

Meanwhile, FocusEconomics’ Reynolds said, “if it is not broken, do not fix it,” explaining that the country has reaped rewards from adherence to the IMF programme over the past year: international reserves have risen, structural reforms have come thick and fast, and the external sector has strengthened. “We see Egypt continuing to stick to the programme in 2018, which is vital for ensuring economic credibility and stability. However, some further fiscal slippages are possible, particularly given higher oil prices,” he added.

The next wave of reforms that the government should implement in 2018

“The government needs to continue on the road to fiscal probity, by reforming energy subsidies—particularly given the recent uptick in oil prices—and move towards cash transfers. This is in addition to improving the functioning of the labour market to chisel away at still-elevated youth unemployment and boost the female participation rate, which will be key to ensuring inclusive growth,” said FocusEconomics’s Reynolds.

On the other hand, MIGA’s Honda said that it is important for the government to continue implementing business climate reforms that instill confidence in foreign direct investors to engage in Egypt and create private sector jobs, in alignment with the World Bank Group’s Country Partnership Framework for Egypt for FY 2015-19.

Fahmy said that the authorities should focus on tax reforms, finding a way to increase FDIs, and implementing further regulatory measures from the CBE such as withdrawals for non-essential imports.

On the other hand, Arqaam Capital’s senior economist El-Desoki said that sector reforms should be implemented in 2018, in addition to improvements to the ease of doing business and costs.

Meanwhile, Elsewedy believes that the government should implement incentives to encourage local production and continue to reform energy subsidies, as well as the health insurance act.

Khalid agrees with Elsewedy that the authorities need to implement energy subsidy cuts, but phase them over two stages to minimise any sudden damage to the economy. This is now being more encouraged, especially after the recent upward trend in oil prices. In terms of monetary policy, Khalid thinks that the CBE should also start cutting interest rates as soon as possible but in a slow and steady way.

Meanwhile, on the operational front, Khalid said that Egypt needs to pay more attention to specifying “our economic identity”, i.e. determining what sectors we want to drive our economy forward and what type of FDIs we aim to attract.

For his part, Ezz said that the main step in the reforms that were taken by the government is the pound floatation, while now, the steps that the government is taking and is expected to continue in 2018 are translating legislation into procedures that can be implemented on the ground, such as the Industrial Licensing Law and the new Investment Law, in addition to completing the legislative revolution by issuing a number of legislations that have a priority like the bankruptcy law that is currently being discussed. He added that the most important point that must be addressed now is the allocation of land either for trade, industry, or services.

Moreover, Mamdouh said that Egypt needs an industrial-led economic growth at this time as the services-led growth back in 2005 did not achieve the adequate trickle-down effect.  She continued that the ability of the government to gear efforts towards an industrial pickup will support its import substitution plan and increase the contribution of non-oil exports to GDP.

Mamdouh added that SMEs can be the perfect riding horse for this, yet delivering on their potential is challenging.

For his part, Bayoumi said that the government should work on easing the burden on producers, attracting more investments to Egypt, and easing the burden on the most needy and poorest classes.

The role of exports and its leading sectors 

Since the currency floatation, the competitiveness of Egyptian products has improved and with the tourism sector’s performance remaining below 2010 levels, exports are a very valuable source of foreign currency. According to the Ministry of Trade, exports increased in the first 11 months of 2017 to $20.4bn from $18.4bn. Experts surveyed by DNE shared their forecast about exports’ performance in 2018.

El-Shenety expects that the exports rate will increase by about 10-15% in 2018, with the improved capability of exporters to make good use of the pound floatation. In terms of the main sectors that will drive the exports rate increase, El-Shenety believes that textiles and garments are a good potential area, pointing out that another good area is that of food processing and packaging, adding that a very critical area is services exporting as a result of outsourcing back end office services.

Moreover, Fahmy agrees with El-Shenety that exports would increase but with a different average of 10-20%, due to the influence of currency liberalisation as the weaker pound value gives exports a competitive edge, adding that the main sectors that will increase it are energy, food and beverages, and textile sectors.

On the other hand, Elsewedy said that he forecasts exports to increase but did not specify a rate, adding that in his viewpoint, industrial sectors will lead such an increase.

Furthermore, FocusEconomics panellists share the same point of view as they forecast a double-digit export growth (13.1%) to take place in FY 2018 on the back of the weaker pound, while imports should dip. As a result, the net contribution of the exports sector will improve.

On the other hand, Ezz disagrees, expecting that Egyptian exports in 2018 will be lower than the previous year, explaining that the significant increase that was witnessed last year was a result of the pound floatation that led to increasing the competitiveness of Egyptian products. However, Ezz believes that exporting services such as tourism will witness a great increase especially after the return of Russian tourism.

El-Desoki agrees with Ezz, saying that exports will not increase significantly, explaining that more reforms are needed in exports procedures, in addition to greater support for medium-sized exporters.

Meanwhile, Mamdouh said that she sees a gradual pickup in the Egyptian exports backed by a back-to-normal production process with the removal of FX shortage and energy overhang.

She added that reforms to the industrial segment will provide additional support, oil exports, and will also enjoy a decent growth with the higher oil prices. Mamdouh said that the fertilisers sector is among the most important ones that will contribute to the increase in the exports rate.

At the same time, Pharos Holding economists forecast non-petroleum exports recovery to continue in 2018, and to reach $18.2bn by FY 2019/20.

Industrial sector winners and losers in 2017 

El-Shenety, Ezz, and Elsewedy agreed that the most important industrial sectors that benefited in 2017 were the exporting sectors.

El-Shenety and Ezz explained that by this, they refer to the exporting sectors that depend mainly on local components.

El-Shenety thinks the most important industrial sectors that recorded losses in 2017 are those that import most of their components from abroad.

“No industrial sector lost in 2017, but we can say that industries that rely on importing most of their components from abroad have benefited less from the pound floatation compared to other industries. But overall, they did not lose because its competitor was the imported product that doubled its price, so the local ones also raised their price,” Ezz explained.

On the other hand, Fahmy thinks that sectors which benefited in 2017 were all industries that involve products that act as substitutes to exported goods and the firms with foreign exchange income streams from exports or international operations.

He added that he believes that 2017’s “losers” were the sectors with costs that were inflated by higher energy prices, imported materials, and bank interest rates such as the automotive industry and ceramic manufacturing sector.

Moreover, Bayoumi thinks 2017’s winners were the chemicals industry, food industry, and engineering sector, while the loser was the automotive sector.

Industrial sector challenges ahead

Ezz highlighted industrial licenses, the problem of lands allocations—assuring that by land allocation he means land with utilities such as electricity, water, etc.—as the main challenges that the industrial sector faces in Egypt.

On the other hand, Fahmy believes that the most prominent challenges facing the industrial sector are the high energy prices, lower demand due to the increase in prices, and higher exchange rates.

Meanwhile, Elsewedy views regulations, reforms, and bureaucracy as the main challenges.

“The industry sector is facing a huge problem which is the ‘clustering problem’. Industrial activities would have a very strong edge if the government clustered them together and then opened markets for them on the global front in order to start to exporting their products constantly and frequently,” Khalid said.

Khalid added that another problem is the value chain, explaining that we have a lot of informal activities that could feed into formal industrial activities thus allowing a complete value chain. So, connecting both together would also help revive and allow this sector to reach its potential.

Furthermore, El-Shenety pinpointed industrial licenses and the lack of an open door to global markets as the main challenges, while Bayoumi said that the industrial sector has a great challenge of restoring its competitiveness and its capability to export.

Industrial growth rate forecasts

In terms of industrial growth rates, Fahmy expects that the industrial growth rate will be around 10-20% in 2018.

On the other hand, Elsewedy expects that the industrial growth rate will register at around 5%, while Bayoumi said that he forecasts industrial growth to reach between 10% and 12% in 2018.

“I believe the industrial growth rate will be higher than the average growth rate of the whole economy and definitely much higher than 2017,” El-Shenety said.

Will the business environment in 2018 maintain the upward trend or backtrack?

All the respondants were optimistic, as they all shared the same expectation that 2018 will be better.

The business environment in 2017 has shown improvements over 2016. MIGA has particularly welcomed the easing of foreign exchange availability to foreign investors over the course of 2017 and the improved protection that the new Investment Law offers for investors. These changes have constituted important improvements in the business environment for cross-border investors that are likely to bear fruit in terms of higher flows of foreign direct investment going forward, said Honda.

On the other hand, Ezz explained that the business environment would improve as there is a clear declared intention by the government to continue economic reforms, while Elsewedy said that 2018 will be better for the business environment in Egypt, as it will bear the fruit of the economic reforms.

Meanwhile, Fahmy said that it will improve slightly due to the expected stability of the Egyptian pound and lessened inflation rate expectations which will allow the CBE to ease monetary policy in 2018, leading to lower borrowing costs for both the public and private sectors.

Moreover, Mamdouh expects a better reflection of the governmental efforts in 2018 with the implementation of the Investment Law and the introduction of the proposed bankruptcy law, which will improve Egypt’s ranking in the ease of doing business, assuring that the investor community has positively perceived all those efforts, particularly with a number of FDI announcements featuring in the news.

Bayoumi expects that the business atmosphere will be better after the presidential election.

In this context, El-Shenety explained it will improve over 2017 due to the presidential election that drives the government to show a desire to improve economic levels and to solve the problems of the people.

On the other hand, El-Desoki thinks that improvements will come later in 2018, after the energy price hike, when consumers and corporations realise that the tough reforms are over.

The business environment will improve in 2018, said Khalid, explaining that it is affected mainly by the financial uncertainty and bureaucracy. “In terms of financial uncertainty, now things are clearer than in 2017. We have an exchange rate that moves within a narrow range with no major volatility, interest rates moving forward with a clear direction, and a clear schedule for the final hikes in utility prices. Thus, it is quite a clear process for a foreign or local investor to do their feasibility studies on the Egyptian market,” he added.

“As for the bureaucracy part, it requires a lot of work and this might be one of the factors that might affect Egypt’s business environment negatively,” Khalid assured.

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