Currency Forecast - EGP - Slower Pace Of Depreciation Coming - SEPT 2015


BMI View: T he Egyptian pound will gradually depreciate over the remainder of 2015 and into 2016 as the Central Bank of Egypt (CBE)'s willingness and ability to support the unit wanes. A weaker currency will bode well for investment into the country and support fragile economic growth.

Short-Term Outlook (three-six months)

We forecast the Egyptian pound will gradually depreciate over the remainder of 2015 as the Central Bank of Egypt (CBE)'s willingness and ability to support the unit wanes. The pound was trading at EGP7.8125/USD on August 3, having fallen 2.3% over the past month, the first time the Central Bank of Egypt (CBE) has allowed the currency to weaken in five months. Our expectation that no significant levels of financial assistance from the Gulf States will be forthcoming in the coming quarters will ensure that pressure on diminishing reverses (which currently stand at USD21.7bn - equivalent to three months of imports) remains elevated. Depreciatory pressures continue to build as indicated by a widening spread between the black and official market for Egyptian pounds, illustrating the official rate is insufficient to meet domestic demand for foreign currency. At the end of January, the black market rate was EGP8.191/USD, one of the highest differentials over the official rate since mid-2013.

Further Depreciation Ahead
Egypt - Exchange Rate, EGP/USD
Source: Bloomberg, BMI

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