Fitch Solutions, an economic research institute, expects the Central Bank of Egypt to raise interest rates by another 3% (300 basis points) before the end of this year.
The institution explained that the decision to raise the interest rate will increase the cost of borrowing and reduce consumption in parallel with the acceleration of inflation, largely caused by the devaluation of the pound sterling, and rising food prices.
The report highlights that food inflation leads to an increase in consumer spending on food and a decrease in spending on other essential goods.
The institution said that an economic and social package of LE 130 billion – US$7.1 billion (representing 1.8% of GDP) announced in March 2022 will partly offset some of the negative effects of high inflation and will not benefit income from high savings certificates in the light of penetration. Weak banker in increasing purchasing power only for a limited segment of dealers with banks.
The report notes that there will be a partial improvement in the tourism sector and the government will introduce plans to support the industrial sector and some export support, but some of the additional production will be consumed locally to meet the needs of a large and growing population, thus limiting the impact on net exports.
In its report, the agency said that the consequences of the Russian-Ukrainian war for the Egyptian economy were severe. Rising inflation triggered a cycle of strong monetary tightening, while the tourism sector slowed down again.
She added that the latest data showed that the Egyptian economy was doing well in the months leading up to the Russian-Ukrainian war, with an average real GDP growth of 9.1% year-on-year between July 2021 and December 2021. background of strong investment and tourism activity.
Source: Cairo 24