Officials from banks’ treasury and exchange markets sectors expect the value of the dollar to range between EGP 17 and EGP 19.5 in 2018.
According to dealers, the economic growth rate is expected to range between 4% and 5%, and inflation is expected to decrease to 13-15%.
According to Haitham Abdelfattah, head of treasury at the Industrial Development and Workers Bank of Egypt (IDBE), the economic growth rate is expected to range from 4.6-4.8% by the end of the fiscal year to end in June 2018. The rate might reach 5.2-5.4% in the first half of FY 2018/2019.
Some of the sectors that are expected to contribute to the growth include retail trade, tourism, energy, industry, and direct investment.
“2018 may witness a slowdown in the loaning rate from the local market, and external debt is also expected to slow down as economic indicators improve,” Abdelfattah said.
He pointed out that there are several challenges that may negatively impact the budget in 2018, including the increase in the price of petroleum products and global wheat prices.
Inflation rates are expected to reach the 13% rate sought by the CBE by the end of 2018. Abdelfattah noted that the CBE may carry out a slow reduction of the interest rate to reach 15% in the last quarter of the year.
Abdelfattah expects foreign exchange reserves to grow by varying rates in 2018, reaching $45bn by the end of the year.
Abdelfattah stressed that banks are ready to inject liquidity into various economic sectors, especially those considered locomotives of economic growth.
Osama El Manialawi, deputy general manager of the treasury sector at a private bank working in the Egyptian market, said that economic growth rates in 2018 are expected to range between 4& and 5%, noting that the construction sector will be one of the main sectors contributing to improving growth rates.
El Manialawi expects the deficit in the budget to continue, as well as the loaning rates in order to bridge the gap of this deficit, though loaning will be at a slower rate.
The value of the dollar, according to El Manialawi, is expected to range between EGP 17 and EGP 19.5, noting that inflation will decrease during the first half of the year, and will increase again during the second half, similarly to the interest rates.
He added that the CBE is facing a great challenge to maintain the current level of foreign exchange reserves, because the attempt to renew deposits with some of the Arab countries may be subject to doubts due to the different economic and social conditions of these countries compared to before.
In addition, the Ministry of Finance has a mission to launch bonds in foreign markets. This is due to the fluctuations in the neighbouring countries which may push investors to demand a higher return on these bonds.
“I do not think that the role of banks will be much different in terms of investing in debt instruments in the new year, because the Ministry of Finance severely needs to cover the budget deficit through the issuance of debt instruments. This is an issue that cannot be solved overnight,” El Manialawi said.
For the banks to shift towards supporting investors, this requires reducing the interest rate to reasonable levels, which is something that may not happen in 2018, so the role of banks to invest in debt tools is expected to continue, according to El Manialawi.
In their funding, banks may focus this year on several important sectors, with the energy sector being the top.
According to the head of the treasury sector at one of the foreign banks working in the local market, the economy is expected to record growth rates of nearly 5% this year, and unemployment rates are likely to decrease to 11%.
He added that the national projects implemented by the state will play a great role in pushing growth rates this year.
He expects the budget deficit to decrease to 9.5% of GDP by the end of the current fiscal year, while debt is expected to decrease to 92%, reaching a range of 80-85% on average.
“The price of the Egyptian pound against the dollar is expected to remain fixed as this current level achieves the goals of the monetary policy committee of the CBE,” the source said.
He added that inflation is expected to decrease to 15%, and the interest rate is expected to gradually be reduced starting from the first quarter of 2018.
He pointed out that foreign exchange reserves are likely to increase this year, and the state’s ability to pay its foreign liabilities will increase.
“The role of banks is to expand their credit base to reach new sectors, such as SMEs, especially in the industrial and service sector. In the new year, banks are expected to focus on SMEs, the gas sector, pharmaceuticals, and the food sector,” the source added.