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Al-Ahram Weekly
9 hours ago
- Business
- Al-Ahram Weekly
Egyptian pound faces short-term pressure but steadies by 2025-end: Fitch's BMI - Economy
The Egyptian pound is expected to remain under pressure in the near term, but Fitch Solutions' research arm, BMI, sees a slightly improved outlook for the currency by the end of 2025, despite ongoing global uncertainties. In its latest report, MENA Monthly Outlook: Most MENA Currencies Will Likely Preserve Their Gains in 2H 2025, BMI maintained the pound's projected trading range at EGP 50–55 per US dollar. The report cites Egypt's substantial external financing needs and continued monetary policy easing as key factors behind the currency's near-term depreciation. However, BMI now expects the pound to close 2025 at EGP 52/USD—a modest upward revision from its earlier forecast of EGP 52.53/USD—on the back of limited portfolio outflows. The Central Bank of Egypt (CBE) has cautiously begun easing monetary policy, cutting key interest rates by a cumulative 325 basis points since the beginning of 2025. Amid the Israeli-Iranian escalation, the Egyptian pound has experienced volatility as investors moved towards safe-haven assets. $2.1 billion exited market after US tariff move 'Investor reaction to the recent US tariff announcement was less severe than anticipated,' BMI noted. 'Only $2.1 billion exited Egypt after the tariffs were unveiled, which initially sent the pound to EGP 51.68/USD on 9 April. Since then, the currency and capital inflows have recovered, especially after the 90-day tariff pause and the US-UK and US-China trade agreements calmed markets.' BMI warned that any renewed tariff tensions could trigger further capital flight and put more intense downward pressure on the currency. It stressed that Egyptian policymakers must manage these risks carefully while balancing the country's financing needs amid a fragile investment climate. Inflation and growth outlook BMI forecasts Egypt's inflation rate to average close to 10 percent between 2025 and 2029, with real GDP growth expected to exceed four percent annually over the same period. The report also projects Egypt's current account balance to average 0 percent during the 2025–2029 period, indicating a perfectly balanced external position in which the country's total receipts from exports, services, income, and transfers match its payments to the rest of the world. In practice, such a balance suggests the economy is neither reliant on foreign savings nor required to invest surplus capital abroad. Regional currency performance shaped by the US dollar More broadly, BMI sees swings in the US dollar and shifts in investor sentiment as the main factors shaping currency performance across the Middle East and North Africa (MENA) for the remainder of 2025. 'The weakening of the US dollar so far this year has driven an appreciation in the region's more flexible currencies,' BMI said. 'Looking ahead, we anticipate that a slightly softer dollar and reduced trade-policy uncertainty will continue to support MENA exchange rates against the greenback.' However, the report warns that this outlook could deteriorate if key downside risks materialize. A renewed surge in the US dollar weighs on all MENA currencies. Similarly, a return to heightened US trade tensions could reignite risk aversion toward emerging markets, leaving Egypt exposed to further capital outflows and additional pressure on the pound. The analysis also flagged that lower oil prices would further weaken the Algerian dinar, intensifying its downward trajectory. Follow us on: Facebook Instagram Whatsapp Short link:
Egypt Today
29-05-2025
- Business
- Egypt Today
Fitch's BMI lowers Egyptian growth forecast amid indirect impact of US tariff uncertainty
Cairo – May 29, 2025: Fitch Solutions' research arm BMI has revised its forecast for Egypt's economic growth in FY2025/2026, lowering it slightly to 4.7 percent, down from an earlier estimate of 5.0 percent. The downgrade reflects mounting global trade uncertainty stemming from new U.S. tariffs, which BMI says have indirectly affected Egypt through weakened external demand and heightened investor caution. Despite the slight downward revision, the projected 4.7 percent expansion marks a notable improvement from the 3.9 percent growth BMI expects for the current FY2024/2025. The firm attributes the expected acceleration to a significant boost in private consumption, driven by public and private sector wage increases, reduced borrowing costs, and a recent expansion in social protection programs. Investment activity is also projected to continue its recovery, further supporting overall economic growth. BMI's forecast remains more optimistic than other major projections, with the Egyptian government seeing GDP growing by 4.5 percent in FY2025/2026 and rising to 5.0 percent in FY2026/2027. Meanwhile, the International Monetary Fund recently upgraded its forecast for Egypt to 4.3 percent growth in FY2025/2026, and the European Bank for Reconstruction and Development projects 4.4 percent growth over the same period. While the new U.S. tariffs are expected to have only a limited direct impact on Egypt's economy, BMI noted that the indirect effects are more significant. Egyptian exports to the U.S. represented just 0.8 percent of GDP in 2024, and the average effective tariff rate on Egyptian goods stands at 10.7 percent, below that faced by most emerging markets. In fact, BMI suggests that the current tariff regime could enhance the competitiveness of Egyptian apparel exports — which make up half of the country's U.S.-bound shipments — given the higher duties imposed on Chinese and Southeast Asian products. The larger concern, BMI says, is the impact on investor sentiment. Foreigners currently hold around $35 billion in LE-denominated treasury bills, with approximately $22 billion considered highly vulnerable to shifts in global risk perception. Following the April 2 announcement of U.S. tariffs, Egypt saw about $2 billion in capital outflows within a week, leading to a temporary depreciation of the LE against the dollar. This volatility, BMI argues, revealed a shift in the authorities' approach to the exchange rate. The Egyptian pound's decline, though short-lived, signaled a growing commitment to exchange rate flexibility. Going forward, BMI expects policymakers to tolerate modest currency depreciation in response to external shocks rather than defending the pound through foreign reserve depletion. The LE is projected to trade between 50 and 55 per $during 2025, ending the year at around 52.50. The temporary truce on tariffs, which paused further U.S. measures for 90 days, helped restore calm in financial markets, reverse capital outflows, and strengthen the Egyptian pound, BMI said. After hitting a post-float low of 51.72–51.75 against the dollar last month, the pound has since rebounded and is now trading below the LE 50 mark. BMI also touched on the outlook for Suez Canal revenues, which have been hit hard by disruptions in the Red Sea. Since Q3 2023, ship traffic through the canal has dropped by half, slashing its contribution to GDP from 2.2 percent to 1.1 percent and resulting in monthly foreign currency losses of about $500 million. While navigation is expected to normalize in FY2025/2026, global trade headwinds are likely to slow the pace of recovery. On the external balance front, BMI expects Egypt's current account deficit to narrow to 5.2 percent of GDP in FY2025/2026 — equivalent to about $18.5 billion — down from an estimated 7.1 percent this fiscal year. This improvement comes despite surging imports, driven largely by demand for consumer goods, raw materials, and capital equipment. If import growth underperforms current projections, the deficit could shrink further to 4.3 percent of GDP, or roughly $15.5 billion. Lower global oil prices are not expected to significantly ease Egypt's import bill. BMI anticipates that declining domestic hydrocarbon production will force the country to increase energy imports in volume terms to meet growing local demand. In terms of monetary policy, BMI has scaled back its earlier projection of 900 basis points in rate cuts through 2025, now expecting a more moderate 500 basis point reduction. The firm cited pressure from the IMF, which has urged Egyptian policymakers to tread carefully with monetary easing to avoid inflationary risks tied to U.S. tariffs and other external pressures.
IOL News
23-04-2025
- Business
- IOL News
High gold prices may not boost South African producers amid cost pressures, warns Fitch
Overall, Fitch Solutions' outlook for SA's export sector is 'somewhat mixed' with 'softer growth in major trading partners such as the US and China (expected) to weigh' on demand. The mining sector is predicted to have muted growth despite gold prices breaching highest ever levels above $35 00 per ounce. Image: File Tawanda Karombo High costs could inhibit benefits of high gold prices for South African producers of the precious metal although there is optimism that its auto makers will register growth this year, analysts at Fitch Solutions said on Wednesday, highlighting a mixed outlook for exports this year. South Africa exports automobiles, metals and minerals as well as other manufactured products to markets such as Europe, China and the United States among others. With South Africa falling out with the US, analysts have been weighing up the impact of President Donald Trump's tariffs. Analysts at Fitch Solutions said on Wednesday that the US tariffs on South Africa would affect its agriculture and auto sectors the most. 'The country will face an effective tariff rate of 9.5% according to our calculations and this will likely impact sectors such as agriculture,' said Lara Wolfe, the head of Sub-Saharan Africa country risk for BMI, a Fitch Solutions company. The US tariffs on South Africa were likely to 'have an impact on the auto sector' although Fitch Solutions analysts were optimistic that the sector will register growth and recovery this year. This is premised on improving incomes on the domestic market. Easing interest rates and falling inflation elsewhere across the world could also translate to additional discretionary income for consumers. 'Our autos team have maintained their expectations of growth for the sector in 2025 after contracting in 2024 on the back of improving incomes,' added Wolfe. Overall, Fitch Solutions' outlook for South Africa's export sector was 'somewhat mixed' with 'softer growth in major trading partners such as the US and China (expected) to weigh' on demand. The mining sector was predicted to have muted growth despite gold prices breaching highest ever levels above $3 500 per ounce. 'Our metals and mining team remains bearish about the mining sector despite high gold prices. High costs and a limited product pipeline will continue to weigh on the sector,' explained Wolfe. In terms of household spending, the South African consumption outlook was likely to be characterised by slow inflation and accomodative monetary policy. This was all set to offer some relief to consumers and boost spending. Fitch Solutions reckoned that there was 'likely to be gradual recovery for the rand' while it has forecast average of 3.7% for inflation this year. FNB senior economist Koketso Mano said on Wednenesday though that inflation will resume 'a rising trend' from next month, the fuel price decline will continue to contain overall inflationary pressures. The South Africa Reserve Bank was now expected to cut interest rates by two sets of 25 basis points in the second half of the current year, said Fitch Solutions, citing its analysts downgraded expectations on the inflation forecast.
