It is too early to be making predictions about its long-term impact. However, these shocks are not new.
From COVID-19 to the Russia-Ukraine war, crises have become a recurring feature of the modern economic landscape. The conflict is simply the latest in a series of disruptions that have tested economic resilience in recent years.
One constant in all these crises has been the disproportionate impact on emerging markets. In periods of heightened uncertainty, they are typically among the most exposed, facing capital outflows, currency depreciation and tighter financial conditions as global investors retreat from risk.
But perhaps one of the most striking shifts we have seen over the last three months, is economic discipline – and nowhere has this been more apparent than in Egypt.
Bloomberg has been operating in over 100 emerging markets and developing economies around the world for more than two decades. From across the Middle East and Africa to markets in South America, we have seen firsthand how economies have navigated the turbulence that comes with these economic shocks and the knock-on effects of central bank decision making.
Yet what we’re currently seeing is emerging markets weathering shifts in global risk appetite better than before, with more contained capital outflows, steadier growth and improved inflation dynamics.
When it comes to Egypt, this discipline is not just about how it has responded to the current crisis, avoiding the urge to flood the market with dollars and allowing currency weakening, but also the steps taken in the years prior.
Over the past two years, Egypt has pursued a meaningful reform programme: adopting a more flexible exchange rate, strengthening monetary and fiscal frameworks, and improving the transparency and predictability of policymaking. These are not cosmetic changes — they reflect hard lessons learned from repeated external shocks.
For economies such as Egypt, which has often relied on so-called “hot money”, maintaining investor confidence is central to economic stability. There are increasing signs that policy direction is becoming more predictable and better understood by markets, supporting a gradual shift towards a more market-driven system.
Rather than defending the currency through intervention or trade restrictions, authorities have allowed market forces to play a greater role in restoring competitiveness and supporting economic adjustment. In simple terms, the result is greater trust in the market.
International institutions have recognised this shift. The International Monetary Fund has noted that Egypt’s move towards greater exchange rate flexibility, alongside tighter monetary and fiscal policies, has been central to stabilising the economy, even amid continued external pressures.
At the same time, efforts to improve public spending efficiency and manage debt have helped reinforce macroeconomic stability. Deeper structural improvements are also taking hold. The development of interest rate swap markets and more liquid bond trading is strengthening policy transmission and market resilience.
Across the region, Bloomberg has a longstanding track record of supporting the development of more transparent, liquid and resilient fixed income markets. This provides a unique vantage point on the policy choices and market structures that have helped economies deepen their local debt markets over time.
We are seeing this play out in Egypt, where the central bank has taken further steps to modernise market infrastructure, including through partnerships that enhance transparency and reduce operational risk. These reforms, while technical, play a critical role in strengthening the overall functioning of financial markets.
None of this is to suggest that Egypt, like the rest of the global economy, will be immune to further headwinds from the current crisis. Recovery will take time. But it is precisely by taking a pragmatic, rather than reactive, approach to economic policy, and by building the necessary infrastructure in advance, that economies will be best placed to rebound when conditions stabilise.
Egypt stands today as perhaps the clearest sign that these lessons are being learned across emerging markets. For a country that has navigated its share of turbulence, that is a genuinely encouraging foundation on which to build.
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*The writer is the Global Head of External Affairs at Bloomberg LP.
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