Monthly Report May 2017

Transcription

1 Monthly Report May 2017 Egypt s Economic & Political Update

2 Page 1 FOREIGN POLICY & TRADE President Abdel Fattah El Sisi visits the UAE, Kuwait, and Bahrain on his GCC tour Foreign Minister Sameh Shoukry met with Ugandan President Yoweri Musevini to discuss water security and cooperating with the Nile Basin countries Defense Minister Sedki Sobhi headed a delegation to the Ivory Coast to attend a Community of Sahel-Saharan state ministerial meeting Prime Minister Sherif Ismail flew to the United Kingdom to participate in a two-day Somalia Conference Minister of Trade and Industry Tarek Kabil and Minister of Investment and International Cooperation Sahar Nasr attended Beijing s Belt and Road Forum to promote Egyptian investment STAKEHOLDERS UPDATE Mohab Mamish named Head of the Suez Canal Economic Zone in addition to his position as Chairman of Suez Canal Authority Mona Zobeiaa named new Chairperson of the General Authority for Investment (GAFI) PUBLIC POLICY & REGULATIONS The House of Representatives passed the long awaited Investment Law and its pending the approval of the President The Ministry of Electricity is expected to announced new electricity prices this month, with the increases to be implemented in July The Ministry of Finance has completed drafting amendments to the Income Tax Law and sent them to the Parliament s Economics Committee for discussion before preparing a final draft for the cabinet President Abdel Fattah El Sisi ordered the Ministry of Interior and Armed Forces to regain control of illegally acquire state lands President El Sisi has ratified the new NGO law regulating civil society organizations

3 Page 2 OTHER MONITORED ISSUES Automotive sales fell 46.5% year-on-year in Q to 26,500 vehicles, down from 49,600 during the same period in 2016 Japanese multinationals Mitsubishi and Hitachi submitted offers to the Ministry of Electricity to build 2 EGP 9 billion 500 MW wind farms under the feedin tariff program Sahar Nasr signed a USD 90.8 million education agreement with Japan s ambassador to Cairo to develop Egypt s human resources Egyptian Financial Supervisory Authority has issued new regulations on investment in brokerage firms The IDA is planning to tender 26 million sqm of land for industrial projects this year as part of a program to push 60 million sqm into the market over the coming three years The first expo for Egyptian exports to Africa was held in Nairobi, Kenya PICO Group subsidiary Cheiron Egypt has acquired 100% of Engie s West El Burullus gas concession Banque Misr agreed to extend a EGP 1.2 billionn facility to Damietta furniture city at an exceptional 7% interest rate Coptic Orthodox Pope Tawadros II met Queen Elizabeth yesterday at the Windsor Castle A Trade and Industry Ministry delegation is in Riyadh to participate in the Egyptian-Saudi Trade Committee EBRD sees Egypt growing at 4.5% in 2018 thanks to improvements in the business environment, up from its forecast of 3.8% for this year BUDGET The draft budget for FY2017/18 has been submitted to the Parliament on the May 9th of 2017 for approval. The new budget s targets will see a rise in public expenditure, public revenues, budget deficit and a decline in budget deficit as a percentage of GDP (as compared to FY2016/17 targets). The GoE is targeting to cut the budget deficit to 9% in FY 2017/18, down from an expected deficit of 10.5% in FY 2016/17, assuming a 4.6% real GDP growth. The GoE targets to reach this by achieving around 30% growth in public revenues vs. around 21% growth in public expenditure, fueled by a number of reforms on both the revenue and expenditure sides. It is noteworthy to mention that the FY2017/18 targets a primary budget surplus for the first time in Egypt s history. That is, overall deficit without calculating interest payments is targeted to reach a surplus of around EGP 11 billion. The FY2017/18 budget targets to increase tax revenues as a % of GDP to 14.7%, up from an expected 13.4% in FY2016/17. The large increase in non-tax revenues to EGP 231billion vs. EGP 186 billion, is expected on the back of projected increases in Suez Canal and EGPC revenues, and the revenues expected from land sales.

4 Page 3 MONETARY POLICY Following the CBE s unexpected policy rate hikes, Egyptian stocks fell the most globally. Governor Tarek Amer has been defending this move, stating that investment worth around USD 1 billion has entered the country since. The CBE issued a directive stating that Egyptian banks can only do business with us to 7 foreign exchange bureaus at a time. The CBE has given banks a 3-month period to comply with the regulations and share copies of the updated contracts. INFLATION In a meeting held on May 21 the Monetary Policy Committee (MPC) decided to raise the overnight deposit rate, overnight lending rate, the rate of the CBE s main operation, and the discount rate by 200 basis points to 16.75%, 17.75%, and 17.25%, 17.25%, respectively. Annual headline inflation recorded 31.46%, which was mainly driven by food items. The annual rate declined for the second month in a row to register 32.06%. Headline Inflation Core Inflation 35% 30% 25% The CBE has launched an initiative to support microenterprises, seeking to allocate EGP 20 billion through the banking sector to fund 2 million new enterprises in the next 3 years. Generally, microenterprises are funded by the Ministry of Social Solidarity, the Social Fund for Development, and the Local Development Fund, banks have not usually provided the funding. Remittances from Egyptian abroad have increased to USD 8 billion since November 2016, up 13.8% from the same time a year earlier. 20% 15% 10% 5% Source: Central Bank of Egypt

5 Page 4 NET INTERNATIONAL RESERVES Net foreign reserves slightly increased by 0.5% to each USD billion from USD28.5 billion at the end of March According to Hafez Ghanem, the World Bank s Vice President for the Middle East and North Africa, Egypt is scheduled to receive in December 2017 the 3rd and last USD 1 billion tranche loan from the World Bank (WB). Ghanem stated that the WB s strategy is based on two main pillars: improving the social safety nets and increase in investments to provide job opportunities and The International Monetary Fund (IMF) and Egypt have reached a staff-level agreement to unravel the 2nd tranche of the 12 billion, 3-year loan program. According to Minister of Finance Amr El Garhy, The IMF is set to disperse USD 1.25 billion by mid-june USD bn 0 USD bn. Source: Central Bank of Egypt Governor of the CBE has announced that the Government of Egypt (GoE) will be paying USD 750 million in arrears to international oil companies by the start of June. Amer stated that similar payments have been disbursed to companies, although he did not state how much, when, and to whom. Egypt s dues currently stands at around USD 3.5 billion. +0.5%

6 Page 5 TOURISM Egypt has witnessed tourism revenues of USD 1.6 billion from around 1.7 million tourists from January-March 2017, compared to the USD 1.5 billion from 1.2 million tourists in the same period of During March 2017, the number of tourists visiting Egypt stood at 654,900 compared to the 440,740 in March 2016, increasing by nearly 49%. The number of tourists arriving from Arab countries reached 197,900 in March 2017, compared to 151,200 in March According to CAPMAS the largest increase was from Western Europe (31%), the Middle East (24.6%), and Eastern Europeans (21.6) mn 12.1 Suez Canal 11.8 Number of Passengers 5.3 Cairo Airport Sharm El Sheikh Airport Hurghada Airport Source: CAPMAS Tourism Revenues President Abdel Fattah El Sisi has issued a decree appointing Chairman of the Suez Canal Authority Mohab Mamish as Head of the Suez Canal Economic Authority, to replace Ahmed Darwish. The decree stated that Mamish will assume responsibility for 1 year while still acting as Chairman of the Authority. Revenues from the Suez Canal stood at USD million during March and April, 4.1% higher than the same period in Mamish has decided to establish an international shipyard at the Adabiya bn Jan-Mar 2016 Jan-Mar 2017 Source: CAPMAS area, in cooperation with Mitsubishi. According to Mamish, the new shipyard would provide transiting ships with refueling and other logistics services. He also announced that the Suez Canal Authority is planning to operate two container ships between the East and West Port Said ports.

7 Page 6 Law Statuses Investment Law Consumer Protection Law Bids & Tenders Law Local Administration Law Unified Building Law Labor Law Gas Law Health Insurance Law Bankruptcy Law Food Safety Law Customs Law SME Law Early Drafting Phase Mid Cabinet Approval Phase Final Pending Parliament Discussion/Approval Complete Pending Presidential Ratification