This projection was made by Ramona Moubarak, Head of MENA Country Risk & Global Banking at BMI, during a webinar the company held on Wednesday to showcase its update on the MENA macroeconomic outlook for the second half (2H) of 2024 and 2025.

Since January, CBE raised the key interest rates by eight percent (800 bps), bringing the total hikes it has applied since March 2022 to 19 percent (1900 bps).

CBE's Monetary Policy's next meeting is scheduled for 18 July, the first in FY2024/2024 and the fourth in 2024.

Moubarak expected CBE to return to easing the tightening monetary policy in 2025, when inflation begins to go down according to predictions, to support the economy that has suffered from rampant inflation due to the high cost of borrowing.

“The June inflation rate announced today, which showed an increase of 1.6 percent, came a touch below our expectations since we expected the rate to rise to 1.8 percent. But all in all, inflation will average about 27 percent in the 2H of 2024 and 29 percent through all of 2024. In 2025, inflation will slow down, and we expect to reach an average of 18 percent by the end of 2025,” Moubarak projected.

On the other hand, Moubarak expected foreign exchange performance in the market to fluctuate before standing at EGP 47/ 1 USD by the end of 2024, thus balancing the currency parallel market and providing a level that the authorities are comfortable with and capable of defending.

“This is because of the buffer that the government accumulated and some improvement in the fundamentals of the economy that will allow it to support this level, at least over the short term versus in three to six months,” Moubarak explained.

She added that the upside for the Egyptian pound, in terms of the possibility of strengthening towards EGP 45/ 1 USD, requires normalizing navigation in the Red Sea -- which will restore some $400 million in receipts to Egypt monthly -- and ending the war in Gaza.

“This would provide a boost to the tourism sector in the country,” Moubarak noted.

Commenting on the significant Cabinet reshuffle Egypt announced last week, Moubarak said it aimed to signal to the market and investors a desire for a strong momentum for reforms that would put Egypt's economic recovery on a sustainable path.

In this respect, Moubarak explained that a sustainable path helps the country secure sustainable foreign currency inflows, especially from foreign direct investment and the expansion of the exports of goods and services.

Furthermore, Moubarak stressed that Egypt needs to achieve progress on the reforms to keep fueling this momentum. She explained that the country's external buffers significantly improved in March and May due to signing the $35 billion Ras El-Hekma deal and receiving $820 million constituting the first and second tranches of the IMF’s $8 billion loan programme.

Moreover, Moubarak pointed out that Egypt’s net international reserves set a new record in June, reaching over $46 billion.

“These reserves cover about 7.4 months of Egypt’s imports, which surpass those of five months of imports in June 2023 and 3.9 months of imports in June 2022”, according to Moubarak.

She added that these numbers are significant given Egypt’s financing needs in FY2024/2025, which, according to BMI's estimates, amounts to $20 billion, including the current account deficit of around $13-14 billion.