THE WEEKLY EGYPT S BALANCE OF PAYMENTS RECORDS A SURPLUS IN THIS ISSUE... Thursday A WORLD OF REAL POSSIBILITIES

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1 THE WEEKLY Thursday 12 th Jan Issue #1 EGYPT S BALANCE OF PAYMENTS RECORDS A SURPLUS Egypt s Balance of Payments ran an overall surplus of USD1.9 billion during Q1 FY 2016/17 (Jul-Sep 2016) versus an overall deficit of USD3.7 billion during the corresponding period a year earlier. This surplus is mainly attributed to the performance of the capital and financial account, which witnessed a surge in net inflows, reaching USD7.1 billion, compared to USD1.6 billion in the previous year. The increase in net inflows of capital and financial account came on the back of a 35.7% growth in Net Foreign Direct Investment inflows to USD1.9 billion due to the rise in net inflows for the oil sector and greenfield investments. On the other hand, the current account deficit (Trade and Services Balance & Transfers) increased by 24.3% to USD4.98 billion compared to USD4.01 billion. This increase stemmed from the 50.2% decline in the services surplus, driven by the fall in tourism revenues by 56.1% to USD758.2 million. Trade balance deficit dropped by 13.4% to USD8.7 billion compared to USD10 billion one year earlier. The improvement in the position of trade balance is due to an 11.2% increase in merchandise export proceeds to USD5.3 billion and a 5.5% decrease in merchandise import bill to USD13.9 billion IN THIS ISSUE... Banking Sector Updates Economic Growth Rate Increases NIR Records Its Highest Level Since 2011 President Al-Sisi Meets Representatives Of Investment Funds First Bankruptcy Law Is Approved Eni Plans To Raise Its Investments In Egypt Egypt s Annual Inflation Rate Hikes A WORLD OF REAL POSSIBILITIES 1

2 BANKING SECTOR UPDATES The Central Bank of Egypt (CBE) released its monthly statistical bulletin that tracked the performance of the Egyptian banking sector at the end of September 2016, as shown in the following table: Item (EGP billion) Securities & Investments in T-Bills Loans & Discount Balances Assets Provisions Deposits Sep-16 1,345.5 Sep-15 1,036 Y/Y 29.9% , , , , % 27.5% 5.5% 19.5% Source: Central Bank of Egypt, Monthly Statistical Bulletin (November 2016) The corporate sector accounted for 58% of total credit facilities, while household deposits acquired 62.1% of total deposits at the end of September The relative breakdown of non-government credit balances by economic activity at the end of September 2016 shows that the manufacturing sector accounted for 32.4%, followed by services (27.2%), trade (10.8%), agriculture (1.4%), and unclassified sectors, including the household (28.2%) The Central Bank of Egypt Monthly Statistical Bulletin, November 2016 The CBE Official Website Egypt s Cabinet announced that the economic growth rate increased to 3.4% in Q1 FY2016/17 compared to 3% in Q1 FY2015/16. The higher growth rate is mainly attributed to the increase in the value of implemented investments due to the improvement in the business environment and the noticeable development in national mega-projects. The investment rate in Egypt rose to 12.1% in Q1 FY2016/17, from 11.3% a year earlier due to the increased investment in both public and private sectors. Egypt s Net International Reserves (NIR) recorded its highest level since 2011 after reaching USD24.3 billion in December NIR rose about 5.2% compared to the previous month, supported by the increasing foreign currency inflows from portfolio investments and debt instruments. CBE s Governor, Tarek Amer, announced that portfolio investments amounted to USD1 billion one month after floating the Egyptian Pound. Amer also confirmed that banks operating in Egypt acquired about USD6.9 billion within the first two months after the floatation. President Abdel-Fattah Al-Sisi met, on the 9 th of January, with representatives from 27 regional and international investment funds in the presence of Prime Minister, the CBE s Governor, Ministers of Oil, International Cooperation, Finance, Investment and Industry. During the meeting, President Al-Sisi discussed new investment opportunities in the Egyptian market and stressed the government s efforts to overcome obstacles and provide an attractive climate for investment. Additionally, the ministers presented the government s efforts to encourage investment and stimulate the economy on legislative, administrative and procedural levels. Egypt enjoys a large number of investment assets and promising opportunities in various sectors. It is also witnessing political stability despite troubled conditions in the region We look forward to the investments that will contribute to Egypt s economic development efforts, taking into account that Egypt has one of the highest rates of return on investment in the world President Abdel-Fattah Al-Sisi 9 th January

3 Egypt s cabinet approved the country s first Bankruptcy Law, which aims at improving the business climate in Egypt. The law abolishes imprisonment in cases of bankruptcy and simplifies post-bankruptcy procedures. The new bankruptcy law comes as part of the latest investment legislations adopted by the government to provide the maximum possible amount of guarantees for investors and businessmen Dalia Khorshed Minister of Investment 5 th January 2017 Claudio Descalzi, CEO of Italian energy company Eni, declared that Eni is planning to raise its energy exploration investments in Egypt to USD3.5 billion in 2017, adding that the massive Zohr gas field is expected to start production before the end of This announcement comes in light of his meeting with President Abdel-Fattah Al-Sisi, held on the 5 th of January. Egypt currently tops the 53-country list of Eni s investment portfolio Claudio Descalzi Eni s CEO 5 th January 2017 Petroleum Ministry is planning to implement 11 projects to develop gas fields in cooperation with foreign partners, with total investments worth USD17.5 billion and expected production of 1.9 billion feet of gas per day and 50,000 barrels of condensates. Egypt s annual urban inflation rate jumped to 23.3% in December 2016, from 19.4% in November, which is mainly attributed to the hike in food and beverages prices, whose prices rose 28.3% (Y/Y) in December, and the 32.2% increase in healthcare prices during the same period, in addition to a 23.2% (Y/Y) increase in transportation costs. 3

4 EGYPT AT GLANCE EXCHANGE RATES USD EURO Sterling Pound 12 th Jan * Average Buy & Sell Prices For CBE STOCK MARKET 5 th Jan th Dec th Jan nd Jan Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-1 14,000 12,000 EGP per USD EGP per Euro EGP per Pound Sterling , th Jan th Jan th Dec th Jan nd Jan ,000 EGX 30 EGX 70 EGX , , , , , , , ,000 6,000 4,000 2,000 TB S AUCTION 0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Auction Date Maturity Average Yield % 8 Jan Days % 12 Jan Days % 8 Jan Days % 12 Jan Days % INTEREST RATES Current* Previous** Overnight Deposit Rate 14.75% 11.75% Overnight Lending Rate 15.75% 12.75% Corridor Rate 15.25% 12.25% * at November 2016 ** at June 2016 GLOBAL COMMODITY PRICES Spot Prices 12 th Jan th Jan th Dec th Jan nd Jan Brent Crude * Gold ** Wheat*** 1, , , , , * USD/Barell ** USD/Ounce *** USD/BU Source: Bloomberg CONSUMER PRICE INDEX AND MAJOR COMPONENTS Headline - All items Food and beverages Tobacco and related products Clothing and footwear Housing, water, electricity and gas Weight in basket % Furnishings and household equipment 3.77% Medical care Transportation Communications Recreation and culture Education Hotels, cafes and restaurants Miscellaneous goods and services 100% 39.92% 2.19% 5.41% 18.37% 6.33% 5.68% 3.12% 2.43% 4.63% 4.43% 3.73% November 2015 November 2016 Y/Y (Index) (January 2010=100) % % % % % % % % % % % % % 4

5 Elephantine Island, Aswan, Egypt T : E : research@alexbank.com Head of Research Emil Eskander emil.eskander@alexbank.com Research Manager Hemat El Masry hemat.elmasry@alexbank.com Researchers: Mariam Massoud Senior Associate: Sahar Ezz El Arab sahar.ezzelarab@alexbank.com mariam.massoud@alexbank.com Mirna Mohsen Nahla Abdel Azim mirna.aziz@alexbank.com nahla.abdelazim@alexbank.com Copyright Notice. The Weekly is a publication of ALEXBANK. No part of this publication may be reproduced or duplicated without the prior consent of ALEXBANK.This publication constitutes a summary of published news, quotes and economic indicators. This material does not constitute analytical economic research nor should be treated as such. All charts and graphs are from publicly available sources or proprietary data. Any views expressed in this publication do not necessarily reflect the opinion of ALEXBANK. The news, views and quotes within this publication are gathered from sources deemed to be reliable but which have not been independently verified. ALEXBANK does not make any guarantee to the accuracy or reliability of such information. AlexBank shall not be liable for any losses or damages incurred or suffered as a result of using its publications in part or in their entirety. 5