Central Bank of Egypt...Monetary Policy Report III / 2018 | Central Bank of Egypt 5 Figure 7 Contribution to the Current Account (in p.p., y/y unless otherwise specified) 2016 Source:

Monetary Policy Report III / 2018 | Central Bank of Egypt 0

````````````

Central Bank of Egypt

16

Monetary Policy Report III / 2018


Disclaimer

The cut-off date for the data included in this report is November 15, 2018. Some of the data pre-

sented are preliminary or subject to revisions. There has been new incoming data since the cut-

off date, including but not limited to the release of the inflation statistics for November 2018 as

well as monetary aggregates for October 2018. Furthermore, in its meetings held on December

27, 2018, the Monetary Policy Committee decided to keep the Central Bank of Egypt's key policy

rates unchanged. These and all other incoming data will be incorporated in the following Mone-

tary Policy Report.


Table of Content

THE INITIAL CONDITIONS……………………………………………………………………………………… PAGE 3

THE OUTLOOK………………………………………………………………………………………………….….. PAGE 12

APPENDIX: TABLES AND ABBREVIATIONS..……….………………………………………………..... PAGE 14


Figure 1 Economic Growth of Egypt’s External Environ-ment 1/ (in %, y/y)

Source: Bloomberg & Central Bank of Egypt calculations. 1/ The series is weighted using Egypt’s trade volume in 2015/16.

Figure 2 Headline Inflation of Egypt’s External Environ-ment 1/ (in %, y/y)

Source: Bloomberg & Central Bank of Egypt calculations. 1/ The series is weighted using Egypt’s trade volume in 2015/16.

Figure 3 Contribution to Brent price change (In %, January 2010 = 100, monthly average)

Source: Federal Reserve Bank of New York.

The Initial Conditions

a) Global economic growth continued to slow down, in-

ternational oil prices declined, and capital outflows

from emerging markets continued, however, at a rel-

atively weaker pace.

Economic growth of Egypt’s external environment con-

tinued to soften, registering 2.8% in 2018 Q31, compared

to 3.2% in 2017 Q4, the highest pace since 2011. Economic

growth in advanced economies continued to ease for the

third consecutive quarter to register 1.8%, as slower

growth in the euro area and Japan more than offset a

slightly stronger growth in the UK. Meanwhile, economic

growth of the US remained broadly stable in 2018 Q3,

compared to the previous quarter. On the other hand,

economic growth in emerging economies softened some-

what to register 4.8% in 2018 Q3, after maintaining its con-

tinuous improvement between 2015 Q4 and 2018 Q2. A

slower growth in India and China more than offset a higher

growth in Brazil. Meanwhile, economic growth of Russia

remained broadly stable in 2018 Q3, compared to the pre-

vious quarter.

Headline inflation of Egypt’s external environment contin-

ued to increase for the second consecutive quarter to reg-

ister 2.5% in 2018 Q3, compared to 2.2% in 2018 Q2. Infla-

tion in advanced economies continued to increase to reg-

ister 2.2% in 2018 Q3, up from 2.0% in 2018 Q2, mainly

due to a moderate acceleration of the euro area, the UK

and Japan inflation rates, despite the marginal decelera-

tion of inflation rates in the US in 2018 Q3. Furthermore,

inflation rates in emerging economies rose slightly to reg-

ister 3.0% in 2018 Q3, after stabilizing for the previous two

quarters at 2.7%. The acceleration of inflation rate in Bra-

zil, China and Russia more than offset the deceleration of

the inflation rate in India in 2018 Q3, compared to the pre-

vious quarter.

1 2018 Q3 data for Brazil, India, Russia and the UK are based on Bloomberg composite forecasts.

-0.5

0.5

1.5

2.5

3.5

4.5

5.5

Ma

r-14

Jun

-14

Se

p-1

4

Dec-1

4

Ma

r-15

Jun

-15

Se

p-1

5

Dec-1

5

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Se

p-1

8

Advanced economies

Emerging economies

World

-2.0

0.0

2.0

4.0

6.0

8.0

Ma

r-14

Jun

-14

Se

p-1

4

Dec-1

4

Ma

r-15

Jun

-15

Se

p-1

5

Dec-1

5

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Mar-

18

Jun

-18

Se

p-1

8

Advanced economiesEmerging economiesWorld

-100

-50

0

50

100

Mar-

14

Jun

-14

Se

p-1

4

Dec-1

4

Ma

r-15

Jun

-15

Se

p-1

5

Dec-1

5

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Se

p-1

8

Demand Supply

Residual Brent price


Figure 4 International Food Prices (in %, y/y, using domestic CPI basket weights of core food items )

Source: Central Bank of Egypt calulations, World Bank and Food and Agriculture Organization.

Figure 5 Advanced Economies Central Banks’ Policy Rates (in %)

Source: Bloomberg and Central Bank of Egypt calculations.

Figure 6 Emerging Markets Capital Flows Proxy (index)

Source: Bloomberg.

After slowing down in 2018 Q2, global trade annual

growth accelerated modestly to an average of 3.9% be-

tween July and August 2018. This compares to an average

of 3.6% in the previous quarter.

Brent crude oil prices continued to decline to register an

average of 69.9 USD/barrel in the first two weeks of No-

vember 2018, after peaking at 86.1 USD/barrel in mid Oc-

tober 2018. This was mainly driven by concerns about

global economic growth, growing US inventories as well as

temporary wavier of Iran sanctions which came into effect

in early November 2018. Nonetheless, spot prices re-

mained subject to potential volatility stemming from the

supply side. Meanwhile, international food prices, using

domestic CPI basket weights of core food items, continued

to decline on annual terms in October 2018 for the fifth

consecutive month, to register its largest annual decline

since May 2016 at negative 7.4%. This decline was mainly

due to red meat, dairy products, oils and sugar as produc-

tion conditions improved.

The Federal Reserve kept its policy rate unchanged in No-

vember, after raising it by 25 basis points in September

2018 for the third time in 2018. The Bank of England also

kept its policy rate unchanged in November, after raising

it by 25 basis points in August 2018 for the second time

since November 2017. Furthermore, the European Central

Bank kept its policy stance unchanged. The three central

banks made no changes to their asset purchase programs

since the previous monetary policy report. The Federal Re-

serve maintained its balance sheet unwinding plan which

started in October 2017, slowing down the amount of gov-

ernment debt it reinvests. Meanwhile, the European Cen-

tral Bank maintained its plan for phasing out its asset pur-

chase program, halving the monthly purchases since Janu-

ary 2018 to EUR15 billion until the end of December 2018.

Capital flight from emerging markets, which started in Feb-

ruary 2018, continued for the nineth consecutive month in

October 2018, however, at the slowest monthly pace since

April 2018. Capital outflows were supported by concerns

about the growth outlook for emerging economies, the

prospects of further escalation in trade tensions, tighter

-30

-25

-20

-15

-10

-5

0

5

10

15

20

Ma

r-14

Au

g-1

4

Jan

-15

Jun

-15

Nov-1

5

Ap

r-16

Se

p-1

6

Fe

b-1

7

Jul-1

7

Dec-1

7

Ma

y-1

8

Oct-

18

0.00

0.25

0.50

0.75

1.00

1.25

1.50

1.75

2.00

2.25

2.50

Ma

r-14

Jul-1

4

Nov-1

4

Ma

r-15

Jul-1

5

Nov-1

5

Ma

r-16

Jul-1

6

Nov-1

6

Ma

r-17

Jul-1

7

Nov-1

7

Ma

r-18

Jul-1

8

Nov-1

8

Federal Reserve

Bank of England

European Central Bank

100

110

120

130

140

150

160

170

Mar-

14

Jul-1

4

Nov-1

4

Ma

r-15

Jul-1

5

Nov-1

5

Ma

r-16

Jul-1

6

Nov-1

6

Mar-

17

Jul-1

7

Nov-1

7

Ma

r-18

Jul-1

8

Nov-1

8


Figure 7 Contribution to the Current Account (in p.p., y/y unless otherwise specified)

Source: Central Bank of Egypt.

Figure 8 Tourism Receipts and Payments (in USD billion)


Figure 9 Difference between Foreign Direct Invest-ments (net) and the Current Account Exclud-ing Official Transfers (In USD billion)


global financial conditions, as well as weaker fundamen-

tals in some emerging economies.

b) The external balance continued to benefit from in-

creased competitiveness and the liberalized exchange

rate system.

The current account deficit continued to narrow in 2018

Q2 on annual terms for the seventh consecutive quarter.

The pace of improvement regained momentum in 2018

Q2, after losing momentum in the previous two quarters.

Compared to the previous quarter, a more favorable an-

nual contribution from the hydrocarbon trade deficit, net

services receipts and remittances have more than offset

the less favorable contribution from the non-hydrocarbon

trade deficit and net income payments.

Taken together, net exports of goods and services contin-

ued to narrow in 2018 Q2 on annual terms for the sixth

consecutive quarter, as higher exports of goods and ser-

vices continued to more than offset higher imports. How-

ever, the pace of annual improvement continued to slow-

down for the third consecutive quarter.

Despite higher oil prices in 2018 Q2, which increased the

value of hydrocarbon exports and imports, the hydrocar-

bon trade deficit resumed its improvement on annual

terms in 2018 Q2 for the second consecutive quarter after

deteriorating in 2017 Q4, supported mainly by lower im-

port volumes and increased domestic production.

After witnessing a gradual slowdown in its annual im-

provement since 2017 Q1, the non-hydrocarbon trade def-

icit continued to increase in 2018 Q2 for the third consec-

utive quarter. The negative annual contribution of non-hy-

drocarbon imports continued to increase for the third con-

secutive quarter, while the positive contribution of non-

hydrocarbon exports declined for the first time since 2017

Q2.

-150

-100

-50

0

50

100

150

200

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

Private transfersServices balanceNon-hydrocarbon trade balanceHydrocarbon trade balanceInvestment Income balanceOfficial transfers

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

-1.5-1.0-0.50.00.51.01.52.02.53.03.54.0

Dec-1

0

Jun

-11

Dec-1

1

Jun

-12

Dec-1

2

Jun

-13

Dec-1

3

Jun

-14

Dec-1

4

Jun

-15

Dec-1

5

Jun

-16

Dec-1

6

Jun

-17

Dec-1

7

Jun

-18

Gross tourism payments (LHS)

Gross tourism receipts (LHS)

Net tourism revenues (RHS)

-5

-4

-3

-2

-1

0

1

2

3

4

5

6

Jun

-07

Dec-0

7Jun

-08

Dec-0

8Jun

-09

Dec-0

9Jun

-10

Dec-1

0Jun

-11

Dec-1

1Jun

-12

Dec-1

2Jun

-13

Dec-1

3Jun

-14

Dec-1

4Jun

-15

Dec-1

5Jun

-16

Dec-1

6Jun

-17

Dec-1

7Jun

-18


Figure 10 Foreign Direct Investments by Sector

(in USD billion)


Figure 11 Real GDP Growth at Market Prices (in p.p., y/y)

Source: Ministry of Planning, Follow-up and Administrative Reform.

Figure 12 Contribution to Real GDP Growth by Sector (in p.p., y/y)


The services surplus continued to increase in 2018 Q2 on

annual terms and its contribution to the improvement of

the current account deficit rose, yet its pace of growth sof-

tened for the second consecutive quarter. The weaker

pace was mainly due to a less favorable contribution from

net receipts from tourism, transportation excluding Suez

Canal tolls, as well as net government services, which have

more than offset the more favorable contribution from

Suez Canal tolls and net other services.

On the other hand, net FDI inflows registered an annual

increase in 2018 Q2 for the first quarter since 2017 Q2.

Meanwhile, portfolio flows registered a net outflow in

2018 Q2 for the first quarter since 2016 Q3. This was

mainly due to net portfolio outflows excluding bonds due

to global factors more than offseting the inflow from the

EUR 2.0 billion Eurobonds issued in April 2018. Further-

more, gross international reserves registered USD44.5 bil-

lion in October 2018, the highest on record.

c) Annual real GDP growth stabilized at 5.4% in 2018 Q2, af-

ter rising for six consecutive quarters; and the unemploy-

ment rate stabilized at 10.0% in 2018 in Q3.

After increasing for six consecutive quarters since 2016

Q4, real GDP growth stabilized at 5.4% in 2018 Q2. Com-

pared to the previous quarter, the positive contribution of

private domestic demand and net exports declined, while

that of public domestic demand increased. The unemploy-

ment rate stabilized at 10.0% in 2018 Q3, after declining

for seven consecutive quarters.

The decline in private demand was mainly driven by pri-

vate consumption and to a lesser extent by private invest-

ments, while the increase in public demand was mainly

driven by public investments in electricity, natural gas ex-

tractions, among other sectors. The positive contribution

of net exports to growth continued to decline for the sec-

ond consecutive quarter, driven mainly by exports.

At the sectoral level, growth stabilized mainly as the less

favorable positive contribution of the natural gas extrac-

tions, activity was offset by minor improvements in con-

struction and other sectors.

-4

-2

0

2

4

6

Jun

-16

Se

p-1

6

Dec-1

6

Mar-

17

Jun

-17

Se

p-1

7

Dec-1

7

Mar-

18

Jun

-18

Gross outflows

Non-residents purchases of real estate

Oil & Gas

Net purchase of companies and assets by non-resdientsNewly issued capital or capital increase

1.2 0.7 1.5-0.3

1.63.3

1.3 1.4 0.8 0.42.51.3

-1.1

1.1

-1.9 -1.2 -1.3

1.8 0.9 2.3 2.11.71.6 6.8 2.4

4.23.5

2.2 2.2 2.8 2.2 2.81.2

4.16.4

4.9

2.13.9 4.2

5.3 5.2 5.3 5.4 5.4

-6

-2

2

6

10

14

03/0

4

04/0

5-0

7/0

8

08/0

9-0

9/1

0

10/1

1-1

2/1

3

13/1

4-1

5/1

6

16/1

7

17/1

8

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Private domestic demandNet ExportsPublic domestic demandGDP Expenditure

0.5 0.4 0.5 0.4 0.3 0.4 0.4 0.4 0.3 0.3 0.4

3.1 2.8 3.01.4 2.0 2.4 2.6 2.6 2.4 2.5 2.9

0.80.5 0.7

-0.1 -0.6 -0.3

0.9 0.6 1.1 1.2 0.8

1.20.7

1.0

0.10.4 0.4

0.7 0.9 0.6 0.5 0.5

0.8

0.60.8

0.30.6 0.7

0.5 0.5 0.5 0.5 0.5

7.1

4.96.2

2.12.9

3.6

5.2 5.2 5.2 5.3 5.3

-5

0

5

10

05/0

6-0

7/0

8

08/0

9-0

9/1

0

05/0

6-0

9/1

0

10/1

1-1

2/1

3

13/1

4-1

5-1

6

16/1

7

17/1

8

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Suez CanalTradeNon-hydrocarbon IndustryHydrocarbon industryServicesAgricultureGDP at factor cost


Figure 13 Leading Indicators (in %, y/y, unless otherwise specified)

Source: Bloomberg.

Figure 14 Contribution to M2 Growth (in p.p., y/y)


Figure 15 Inflation Adjusted L/C Claims on the Private Sector (in %, y/y, average of period)


Available leading indicators for the non-hydrocarbon sec-

tor point to weakening activity. The Purchasing Manager’s

Index weakened compared to its average level in 2018 Q2.

Hotel occupancy rates grew at a slower pace in 2018 Q3.

Car sales and Suez Canal net tonnage grew on annual

terms at a slower pace in 2018 Q3 compared to 2018 Q2.

On the other hand, the natural gas production increased

on annual terms at faster pace during July and August

2018, compared to the average pace in 2018 Q2.

d) Broad money growth continued to decline supported by

fiscal consolidation.

Following the fading of the exchange rate revaluation ef-

fect in 2017 Q4, annual M2 growth continued to decline to

average 17.1% in 2018 Q3, supported by fiscal consolida-

tion. The contribution of foreign non-bank and external fi-

nancing continued to decrease in 2018 Q3, in line with the

reversal of net portfolio inflows due to global factors as

well as the absence of Eurobond issuances. Together they

have more than offsett the increase in domestic bank fi-

nancing. Data up to 2018 Q2 show that declining M2

growth favorably coincided with annual changes of broad

money velocity, which had turned positive since 2017 Q3

suggesting lower room for noninflationary money growth,

despite showing weaker momentum recently.

Meanwhile, following its decline between 2017 Q2 and

2018 Q1, the contribution of claims on the private sector

to M2 growth increased moderately in 2018 Q3 for the

second consecutive quarter. Inflation adjusted L/C claims

on the private sector began to witness annual increases

since 2018 Q1, after recording annual contractions in

2017. The recovery was especially evident for claims on

the private business sector, while claims on the household

sector recovered by a relatively weaker magnitude. More-

over, the contribution from net claims on public economic

authorities resumed its decline in 2018 Q3 after a brief in-

terruption in 2018 Q1 and Q2. Meanwhile, the contribu-

tion from claims on public sector companies stabilized in

2018 Q3 for the second consecutive quarter.

40

43

46

49

52

-40

-20

0

20

40

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Se

p-1

8

Oct-

18

PMI (RHS, Index level)

Hotel occupancy rate (in %)

-15.0

-5.0

5.0

15.0

25.0

35.0

45.0

Se

p-1

1

Ma

r-12

Se

p-1

2

Ma

r-13

Se

p-1

3

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

Overall fiscal deficit (ex financing bythe Egyptian non-banking sector)Claims on the private sector

Other components of M2

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

Jun

-11

Dec-1

1

Jun

-12

Dec-1

2

Jun

-13

Dec-1

3

Jun

-14

Dec-1

4

Jun

-15

Dec-1

5

Jun

-16

Dec-1

6

Jun

-17

Dec-1

7

Jun

-18


Figure 16 CIC Outside the Banking System1/

(in %)

Source: Central Bank of Egypt. 1/ Average CIC to four quarters rolling sum of GDP.

Figure 17 Contribution to Adjusted M0 and the Money Multiplier 1/ (in p.p., y/y unless otherwise stated)

Source: Central Bank of Egypt. 1/ M0 adjusted by total excess liquidity.

Figure 18 Excess Liquidity 1/

(in EGP billion)

Source: Central Bank of Egypt. 1/ Excess liquidity is adjusted by O/N lending facility.

Within the components of M2, CIC as a percent of L/C de-

posits in M2 stabilized in 2018 Q3 for the second consecu-

tive quarter at a ratio below it’s long term historical aver-

age, suggesting continued normalization of currency hold-

ing behavior. Meanwhile, the annual growth of F/C depos-

its in USD remained relatively stable, and the composition

of private sector deposits continued to be increasingly

leaning towards L/C.

Moreover, the structure of household deposits in L/C con-

tinued to be dominated by deposits more than three years

since May 2018, following 1.5 years of dominance by de-

posits less than 3 years amid the introduction of 1.5 year

saving certificates in public banks at a higher rate com-

pared to longer term saving certificates. This reversal is

consistent with redemptions of these certificates since

May 2018, given their cancellation in late April 2018.

Annual growth of M0, adjusted by total excess liquidity,

continued to decline in 2018 Q3 for the fourth consecutive

quarter due to CBE balance sheet operations that led to

lower excess liquidty growth. The money multiplier, meas-

ured as the ratio between local currency components of

broad money and M0 as defined above, remained broadly

stable for the fourth consecutive quarter in 2018 Q3 fol-

lowing its decline between 2016 Q3 and 2017 Q3, given

the relative stability of CIC, excess liquidity and required

reserves as a share of L/C deposits.

e) Real monetary conditions tightened.

Real monetary conditions tightened despite being im-

pacted by potential future inflationary pressures from fis-

cal consolidation measures. This was backed by the previ-

ous policy rate increases, notwithstanding the cumulative

200 bps policy rate cuts since the beginning of 2018.

Meanwhile, the transmission of the nominal policy rate

cuts to nominal interest rates in the economy was strong,

except for rates of L/C government securities.

After declining in December 2017, excess liquidity contin-

ued to increase since January 2018 to record on average

EGP 746.3 billion (13.9% of GDP) during the maintenance

8.0

9.0

10.0

11.0

12.0

13.0

15.0

20.0

25.0

30.0

35.0

Mar-

05

Dec-0

5S

ep-0

6Jun

-07

Mar-

08

Dec-0

8S

ep-0

9Jun

-10

Mar-

11

Dec-1

1S

ep-1

2Jun

-13

Mar-

14

Dec-1

4S

ep-1

5Jun

-16

Mar-

17

Dec-1

7S

ep-1

8

CIC to LC Deposits in M2

Average CIC to GDP (RHS)

1.5

2.0

2.5

3.0

3.5

-25

0

25

50

75

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

Excess Liquidity

RR

CIC outside CBE

M0 adjusted by excess liquidity

M2D/MO (RHS)

0

200

400

600

800

14-O

ct-

13

6-J

an-1

431-M

ar-

14

23-J

un-1

415-S

ep-1

48-D

ec-1

42-M

ar-

15

25-M

ay-1

517-A

ug-1

59-N

ov-1

51-F

eb-1

625-A

pr-

16

18-J

ul-16

10-O

ct-

16

2-J

an-1

727-M

ar-

17

19-J

un-1

711-S

ep-1

74-D

ec-1

726-F

eb-1

821-M

ay-1

813-A

ug-1

85-N

ov-1

8

Average Long-term (Variable-Rate)DepositsAverage Fixed-Rate Deposit

Average O/N Deposit Facility

Average Excess Liquidity


Figure 19 O/N Interbank and CBE Policy Rates

(in %, unless otherwise stated)


Figure 20 Rates of the Treasury’s L/C Marketable Securi-ties1/ (in %, unless otherwise stated)

Source: Central Bank of Egypt calculations. 1/ Up to November 13, 2018.

Figure 21 Local Debt Coverage Ratios1/ (in (x), unless otherwise stated)

Source: Central Bank of Egypt calculations. 1/ Up to November 13, 2018.

period ending on November 5, 2018. The absorption of ex-

cess liquidity over the short term rose mainly due to higher

volumes in seven-day deposit auctions, which recorded on

average EGP 41 billion (0.8% of GDP and 5.8% of excess

liquidity) since mid-February 2018, while the overnight ab-

sorption of excess liquidity continued to average EGP 19.2

billion (0.4% of GDP and 2.8% of excess liquidity). Mean-

while, the effective maturity of liquidity-withdrawing op-

erations greater than seven days continued to range be-

tween 38 and 69 days since March 2018, compared to 18

days between October 2017 and February 2018.

Meanwhile, interbank activity remained strong since April

2018 and the interbank yield curve remained relatively

stable post the 100% transmission of the cumulative 200

bps policy rate cuts on February 15, 2018 and March 29,

2018. Consequently, the interbank rate continued to re-

main below the policy rate by around 30 bps since mid-

August 2017.

Yields for L/C government securities stabilized at 15.8%

net of tax during October and the first half of November

2018, after continuously rising between May and Septem-

ber 2018. This compares to 13.7% in April 2018 and 14.6%

on average in 2017 Q4, before the policy rate cuts by the

CBE. The global events' effect on L/C government securi-

ties has more than offset the impact of the cumulative 200

bps policy rate cuts in February and March 2018. The cov-

erage ratio stabilized at 1.7x on average during October

and the first half of November 2018, compared to 2.1x be-

tween February and April 2018 during the period of policy

rate cuts and 2.4x in 2017. Moreover, the inverted yield

curve steepened in October and beginning of November,

after it has been flattening since the beginning of 2018.

This was driven by the significant increase in demand for

T-bonds recently, which was more than enough to offset

the relative increase in issuance.

Meanwhile, despite the continued tightening global finan-

cial conditions and higher risk premium of emerging mar-

kets since the beginning of 2018, Egyptian Eurobond yields

remained stable relatively since July 2018 after rising be-

tween February and June 2018. Moreover, Egypt’s CDS

0

40

80

120

160

5

10

15

20

14-O

ct-

13

6-J

an-1

431-M

ar-

14

23-J

un-1

415-S

ep-1

48-D

ec-1

42-M

ar-

15

25-M

ay-1

517-A

ug-1

59-N

ov-1

51-F

eb-1

625-A

pr-

16

18-J

ul-16

10-O

ct-

16

2-J

an-1

727-M

ar-

17

19-J

un-1

711-S

ep-1

74-D

ec-1

726-F

eb-1

821-M

ay-1

813-A

ug-1

85-N

ov-1

8

O/N Interbank Volume (in EGP billion, RHS)

O/N Lending Facility

O/N Deposit Facility

O/N Interbank Rate

-300

-200

-100

0

100

200

300

8

10

1214

16

18

20

22

24

Se

p-1

2

Ma

r-13

Se

p-1

3

Ma

r-14

Se

p-1

4

Ma

r-15

Se

p-1

5

Ma

r-16

Se

p-1

6

Ma

r-17

Se

p-1

7

Ma

r-18

Se

p-1

8

WA T-bonds Yield

WA T-bills Yield

WACF (Tax adjusted)

T-Bonds - T-Bills WAY differential (Tax adjusted, inbps, RHS)

0

5

10

15

20

0

2

4

6

8

Se

p-1

2

Ma

r-1

3

Se

p-1

3

Ma

r-1

4

Se

p-1

4

Ma

r-1

5

Se

p-1

5

Ma

r-1

6

Se

p-1

6

Ma

r-1

7

Se

p-1

7

Ma

r-1

8

Se

p-1

8

T-Bills

T-Bonds

Total Demand for L/C Debt

WACF (Tax adjusted)


Figure 22 Select Market Interest Rates1/ (in %)

Source: Central Bank of Egypt. 1/ Up to September 2018.

Figure 23 Stock Market Indices1,2/ (Index, November 1, 2016 = 100)

Source: Egyptian Stock Exchange and Central Bank of Egypt calculations. 1/ Equity performance calculated on EGP basis. 2/ Up to November 15, 2018.

Figure 24 Headline and Core Inflation1/ (in %, y/y, weights in parenthesis)

Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt. 1/Core inflation is headline inflation excluding regulated and volatile food items.

spreads remained relatively low compared to the majority

of peers with similar sovereign credit rating. Furthermore,

Egypt’s outlook was raised to positive in August 2018 by

Moody’s, after S&P upgraded Egypt’s credit rating in May

2018.

In the banking sector, rates for new deposits remained rel-

atively stable to record 12.8% on average since April 2018

after declining in response to the cumulative 200 bps cut

in February and March 2018. Meanwhile, rates for new

loans continued to decline to record 17.0% on average in

2018 Q3. The pricing of new deposits declined by 1.2x

compared to the cumulative 200 bps policy rate cut,

mainly driven by strong declines of deposit rates in public

sector banks, while the pricing of new loans declined by

1.1x. The continued decline of lending rates led to a slight

narrowing of net interest margins, after reaching a peak in

2018 Q2.

In equity markets, real prices continued to be affected by

the negative sentiment on emerging markets. Neverthe-

less, the EGX 30 USD index continued to outperform the

MSCI emerging market index since March 2018, despite its

recent cumulative 30% drop since May 2018. Meanwhile,

real unit prices reported declines in select districts of

Cairo’s residential real estate sector during 2018 Q3 for

the first time since 2016 Q4. The demand continued to

shift from the secondary market towards the primary mar-

ket, given more flexible payment plans offered by numer-

ous developers.

f) Annual headline inflation has been recently affected

by a supply shock in some fresh vegetables, while an-

nual core inflation continued to record single digits.

Annual headline inflation rose to 16.0% and 17.7% in Sep-

tember and October 2018, respectively, affected by infla-

tion of select fresh vegetables. This comes after fiscal con-

solidation measures led headline inflation to rise from the

25-month low of 11.4% in May 2018. Nevertheless, annual

core inflation continued to decline to average 8.7% be-

tween July and October 2018, the lowest rate in more than

two years. Accordingly, the spread between annual head-

line and core inflation continued to widen since June 2018.

6

8

10

12

14

16

18

20

De

c-1

1

Au

g-1

2

Ap

r-13

De

c-1

3

Au

g-1

4

Ap

r-15

De

c-1

5

Au

g-1

6

Ap

r-17

De

c-1

7

Au

g-1

8

O/N Interbank Rate

WACF (Tax adjuxted)

Weighted Average Rate of New Deposits

Weighted Average Rate of New Lending

0

50

100

150

200

250

Nov-1

6

Fe

b-1

7

Ma

y-1

7

Au

g-1

7

Nov-1

7

Fe

b-1

8

Ma

y-1

8

Au

g-1

8

EGX30 Index EGX70 Index

EGX100 Index

0

4

8

12

16

20

24

28

32

36

Oct-

14

Fe

b-1

5

Jun

-15

Oct-

15

Fe

b-1

6

Jun

-16

Oct-

16

Feb-1

7

Jun

-17

Oct-

17

Fe

b-1

8

Jun

-18

Oct-

18

Core Inflation (74.43%)

Headline Inflation (100%)


Figure 25 Contribution to Headline Inflation (in p.p., m/m)

Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt.

Figure 26 Contribution to Headline Inflation (in p.p., m/m)

Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt.

Figure 27 International vs. Domestic Core Food Prices (in %, m/m, using domestic CPI basket weights)

Source: Central Agency for Public Mobilization and Statistics, Central Bank of Egypt, World Bank and Food and Agriculture Organization.

Monthly headline inflation was mainly driven by food in-

flation since August 2018, after being largely driven by

non-food inflation between May and July 2018 due to fis-

cal consolidation measures. Inflation of fresh vegetables

was the main contributor to food inflation, recording in

October 2018 their highest annual inflation since April

2011. Prices of potatoes and tomatoes rose for the eighth

and fourth consecutive month, respectively, accounting

for 65.8% of cumulative monthly headline inflation be-

tween August and October 2018.

Inflation of fresh vegetables has been elevated since June

2018 due to seasonal effects that were heightened by the

indirect effects of the fiscal consolidation measures as well

as transitory supply shocks related to potatoes and toma-

toes. On the other hand, prices of core food items were

largely stable, except for prices of poultry and eggs, which

experienced volatility since July 2018.

Meanwhile, non-food inflation has been contained. It only

reflected higher prices of natural gas for housing in August

2018 as well as public and private education services

prices in October 2018, which were expected in terms of

timing and magnitude.

The volatility of core food inflation witnessed domestically

since August 2018 led to divergence between domestic

and international core food price developments. Interna-

tional core food inflation continued to register negative

monthly rates since June 2018, driven mainly by price de-

clines in poultry, red meat and dairy products. This comes

after domestic and international core food price develop-

ments have been largely consistent since the beginning of

the year, except in June 2018 due to domestic fiscal con-

solidation measures.

-1

0

1

2

3

4

5

Oct-

16

Dec-1

6

Fe

b-1

7

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Fe

b-1

8

Ap

r-18

Jun

-18

Au

g-1

8

Oct-

18

Regulated Items

Fresh Fruits & Vegetables

Core Food Items

Retail Items

Services

-1

0

1

2

3

4

5

6

Oct-

16

Dec-1

6

Fe

b-1

7

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Fe

b-1

8

Ap

r-18

Jun

-18

Au

g-1

8

Oct-

18

Non-Food (60.1%) Food (39.9%)

-6

-4

-2

0

2

4

6

8

10

Oct-

15

Dec-1

5

Fe

b-1

6

Ap

r-16

Jun

-16

Au

g-1

6

Oct-

16

Dec-1

6

Fe

b-1

7

Ap

r-17

Jun

-17

Au

g-1

7

Oct-

17

Dec-1

7

Fe

b-1

8

Ap

r-18

Jun

-18

Au

g-1

8

Oct-

18

International Core Food Prices (based ondomestic weights)

Domestic Core Food Prices


The Outlook

Given contained underlying inflationary pressures and the transitory nature of the supply shock

related to select fresh vegetables, the MPC decided in its meeting on November 15, 2018 to keep

key policy rates unchanged. Current policy rates remain in line with achieving single digit inflation

as soon as the effects of fiscal consolidation measures dissipate.

Figure 28 Inflation Forecast1/ (in %, y/y)

Source: Central Bank of Egypt. 1/ The chart captures uncertainty regarding the inflation forecast with its most likely evolution, given the risks. The band around the center of the forecast shows the range of inflation outcomes that can occur with 30% probability, while the widening bands represent a gradually increasing probability of 50%, 70% and 90%.

Real GDP growth is expected to continue benefiting from structural reform measures, while po-

tential fiscal consolidation measures may temporarily slowdown the recovery of private consump-

tion. Net exports and investments are expected to continue complementing consumption as

growth engines.

The overall fiscal deficit is budgeted to decline to 8.4% of GDP in 2018/19, compared to an ex-

pected 9.8% in 2017/18 and 10.9% in 2016/17, and is targeted to continue declining thereafter.

Meanwhile, the primary fiscal balance is budgeted to record a surplus of 2.0% of GDP in 2018/19,

compared to an estimated surplus of 0.1% of GDP in 2017/18 and a deficit of 1.8% of GDP in

2016/17, with the aim of maintaining this surplus thereafter.

Brent crude oil prices incorporated in the domestic inflation outlook were downwardly revised in

line with recent developments that affected the outlook of international oil prices. Yet spot prices

remained subject to volatility due to potential supply-side factors. International food price fore-

casts, relevant to Egypt's consumption basket, were also downwardly revised mainly because of

lower prices of rice due to improving production prospects and exports competition.

In addition to international commodity price developments, risks from the external economy con-

tinue to include the pace of tightening financial conditions as well as trade tensions. Meanwhile,

domestic risks surrounding the inflation outlook continue to include the timing and magnitude of

0

5

10

15

20

25

30

35

Ma

r-16

Jun

-16

Se

p-1

6

Dec-1

6

Ma

r-17

Jun

-17

Se

p-1

7

Dec-1

7

Ma

r-18

Jun

-18

Se

p-1

8

Dec-1

8

90% 70% 50% 30% confidence interval


potential fiscal consolidation measures, unanticipated supply shocks, and the evolution of infla-

tion expectations as well as demand-side pressures.


Appendix: Tables and Abbreviations


Table A1: CPI Contribution

Weights

Oct-17

Nov-17

Dec-17

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Monthly Contributions to Headline CPI Inflation (in p.p.)

Headline 100.

0 1.1 1.0 -0.2 -0.1 0.3 1.0 1.5 0.2 3.5 2.4 1.8 2.5 2.6

Regulated Items 18.7 0.5 0.5 0.0 0.1 0.0 0.0 0.0 0.2 1.7 0.9 0.2 0.0 0.4

Fresh Fruits & Veg-etables

6.9 0.1 -0.4 0.0 -0.3 0.0 0.5 0.7 -1.0 0.7 1.1 1.2 2.5 1.6

Core CPI 74.4 0.5 0.9 -0.3 0.1 0.3 0.5 0.8 1.0 1.1 0.4 0.4 0.0 0.6

Food Prices 31.1 0.0 0.1 -0.3 0.1 0.4 0.4 0.5 0.9 0.4 -0.1 0.3 -0.1 0.2

of which

Poultry & Red Meat 10.0 -0.2 -0.1 -0.2 0.0 0.2 0.2 0.4 0.3 0.0 -0.2 0.2 -0.2 0.1

Food excl. Poultry & Red Meat

21.1 0.2 0.3 0.0 0.1 0.3 0.2 0.1 0.6 0.3 0.2 0.1 0.0 0.1

Retail Prices 14.5 0.0 0.6 0.0 0.0 -0.2 0.0 0.2 0.1 0.1 0.1 0.0 0.0 0.1

Services 28.9 0.5 0.2 0.0 0.0 0.0 0.1 0.0 0.0 0.7 0.3 0.1 0.0 0.4

Annual Contributions to Headline CPI Inflation (in p.p.)

Headline 100 30.8 26.0 21.9 17.1 14.4 13.3 13.1 11.4 14.4 13.5

14.2 16.0 17.7

Regulated Items 18.7 4.6 4.0 3.9 3.7 3.5 3.2 3.1 3.3 5.1 5.0 4.7 4.3 4.2

Fresh Fruits & Veg-etables

6.9 5.3 4.4 4.2 3.3 2.5 2.1 2.0 0.5 1.7 2.5 3.4 5.8 7.4

Core CPI 74.4 20.9 17.6 13.8 10.1 8.3 8.1 8.0 7.7 7.6 6.0 6.1 5.9 6.1

Food Prices 31.1 13.7 11.2 8.2 5.2 4.2 4.0 3.8 4.0 3.7 2.5 2.6 2.7 2.9

of which

Poultry & Red Meat 10.0 4.6 3.7 2.7 1.8 1.2 1.1 1.1 1.0 0.8 0.3 0.4 0.4 0.7

Food excl. Poultry & Red Meat

21.1 9.1 7.5 5.5 3.5 3.0 3.0 2.7 3.0 2.8 2.2 2.2 2.3 2.2

Retail Prices 14.5 3.1 2.8 2.5 2.0 1.5 1.5 1.7 1.8 1.4 1.4 1.4 1.1 1.1

Services 28.9 4.1 3.6 3.1 2.9 2.6 2.6 2.5 1.9 2.6 2.1 2.1 2.1 2.0

Source: Central Agency for Public Mobilization and Statistics and Central Bank of Egypt calculations.


Table A2: Egypt's Balance of Payments (USD billion)

Date

2015/2016*(1) 2016/2017* (1) 2017/18*

2015/16*(1)

2016/17*(1)

2017/18*(1)

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Trade Balance -38.7 -37.3 -37.3 -10.0 -8.8 -9.4 -9.6 -9.3 -8.9 -8.9 -9.8 -9.3 -9.3

Export proceeds ** 18.7 21.7 25.8 4.3 5.3 5.3 5.2 5.5 5.7 5.8 6.2 6.8 7.0

Petroleum exports 5.7 6.6 8.8 1.1 1.5 1.5 1.4 1.7 1.9 1.8 2.0 2.2 2.8

Other exports 13.0 15.1 17.1 3.2 3.8 3.7 3.8 3.8 3.8 4.1 4.2 4.6 4.3

Import payments** 57.4 59.0 63.1 14.2 14.1 14.7 14.8 14.9 14.6 14.7 16.1 16.0 16.3

Petroleum imports 9.3 12.0 12.5 1.6 2.2 2.7 2.6 3.2 3.5 2.8 3.2 3.4 3.1

Other imports 48.1 47.0 50.6 12.6 11.9 11.9 12.2 11.7 11.2 12.0 12.8 12.6 13.2

Services Balance 6.5 5.6 11.3 0.9 1.0 1.0 0.8 1.5 2.3 2.8 2.5 2.5 3.5

Receipts 16.1 15.4 21.7 3.4 3.6 3.3 3.3 3.7 5.1 5.7 5.1 5.0 5.9

Transportation 9.5 7.9 8.7 2.2 2.3 1.9 1.8 1.8 2.4 2.3 2.1 2.0 2.3 Of which: Suez Canal dues 5.1 4.9 5.7 1.2 1.2 1.3 1.2 1.2 1.2 1.4 1.4 1.4 1.5 Travel ( tourism revenues ) 3.8 4.4 9.8 0.6 0.5 0.8 0.8 1.3 1.5 2.7 2.3 2.3 2.6

Payments 9.5 9.8 10.4 2.6 2.6 2.4 2.5 2.2 2.8 2.8 2.6 2.5 2.4

Travel 2.4 2.3 2.3 0.6 0.7 0.6 0.6 0.6 0.5 0.6 0.6 0.6 0.6 Investment Income Bal-ance -4.5 -4.6 -6.5 -0.7 -1.4 -1.1 -1.1 -1.1 -1.2 -1.5 -1.5 -1.7 -1.8

Receipts 0.4 0.5 0.6 0.1 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.2 0.0

Payments 4.9 5.1 7.1 0.8 1.5 1.2 1.2 1.2 1.4 1.7 1.7 1.9 1.8

Of which: Interest paid 0.8 1.2 1.6 0.1 0.2 0.3 0.3 0.3 0.3 0.4 0.4 0.4 0.4

Current Transfers 16.8 21.8 26.5 4.1 4.4 4.4 5.8 5.8 6.0 6.0 7.1 6.5 6.9

Private (net), 16.7 21.7 26.3 4.1 4.3 4.3 5.7 5.8 5.9 5.9 7.1 6.4 6.8

Official (net) 0.1 0.1 0.2 0.0 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.1 Balance of Current Ac-count -19.8 -14.4 -6.0 -5.7 -4.8 -5.2 -4.2 -3.1 -1.9 -1.6 -1.8 -1.9 -0.6 Capital & Financial Ac-count 21.2 31.0 22.0 8.4 6.6 8.0 10.7 8.4 3.9 6.2 4.2 8.6 3.0

Capital Account -0.1 -0.1 -0.2 -0.1 0.0 0.0 0.0 -0.1 0.0 0.0 0.0 0.0 0.0

Financial Account 21.3 31.1 22.1 8.4 6.6 8.0 10.7 8.4 4.0 6.3 4.2 8.7 3.0

Direct investment abroad -0.2 -0.2 -0.3 0.0 -0.1 -0.1 0.0 0.0 0.0 -0.1 -0.1 -0.1 -0.1 Direct investment in Egypt (net) 6.9 7.9 7.7 2.8 1.0 1.9 2.4 2.3 1.4 1.8 1.9 2.3 1.7 Portfolio investment abroad 0.2 0.2 0.0 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 Portfolio investment in Egypt (Net)# -1.3 16.0 12.1 0.1 0.2 -0.8 1.1 7.6 8.2 7.5 0.5 6.9 -2.8

Of which: Bonds -1.4 5.5 5.3 0.0 0.0 -0.8 0.0 4.0 2.3 0.0 -0.1 3.3 2.1

Other Investments (Net) 15.6 7.2 2.6 5.6 5.4 7.0 7.2 -1.5 -5.6 -3.0 1.8 -0.4 4.2

Net Borrowing 7.1 9.7 10.3 1.5 1.8 2.2 4.8 2.6 0.0 0.7 3.9 2.4 3.3

Medium- and Long-Term Loans (net) -0.2 5.2 6.7 0.2 0.0 1.0 2.9 1.3 0.0 1.0 2.1 1.2 2.4

Medium- and Long-Term Suppliers' Credit 1.5 2.8 1.1 0.5 0.8 0.7 0.5 1.0 0.6 0.2 0.2 0.1 0.6 Short term Suppliers’ Credit (net) 5.8 1.7 2.4 0.8 1.0 0.6 1.5 0.3 -0.6 -0.6 1.6 1.0 0.3

Other Assets -3.5 -12.1 -4.5 -1.3 0.8 -0.2 -2.1 -3.3 -6.5 -3.6 0.3 -1.9 0.7

Other Liabilities 12.0 9.6 -3.1 5.4 2.8 5.0 4.5 -0.8 0.8 0.0 -2.4 -0.9 0.2

Net Errors & Omissions -4.2 -2.9 -3.2 -3.0 -1.0 -0.9 -1.4 -1.3 0.7 0.4 -1.9 -1.3 -0.5

Overall Balance -2.8 13.7 12.8 -0.2 0.8 1.9 5.1 4.0 2.7 5.1 0.5 5.4 1.8

Change in CBE Reserve Assets (Increase -) 2.8 -13.7 -12.8 0.2 -0.8 -1.9 -5.1 -4.0 -2.7 -5.1 -0.5 -5.4 -1.8

* Provisional.

** Including exports and imports of free zones.

# Including net transactions on Egyptian TBs, as well as Egyptian government bonds issued for the Saudi Fund for Development in the

amount of US$ 500 million in FY 2011/2012, Q4. It also includes foreigners' net transactions on medium- term dollar bonds issued by

the Egyptian government in the amount of US$ 2.5 billion in the fourth quarter of 2012/2013, and of US$ 1.0 billion in the first quarter of

2013/2014, in addition to dollar bonds issued in the amount of US$ 1350.0 million in the fourth quarter of 2014/2015.

(1) The data were adjusted according to the latest update.


Table A3: GDP contribution

2013/14 2014/15 2015/16 2016/17 Mar-17

Jun-17

Sep-17

Dec-17

Mar-18

Jun-18

GDP (at Market Prices) 2.92 4.37 4.35 4.18 4.42 5.00 5.18 5.28 5.40 5.40

GDP (at Factor cost) 2.92 3.37 2.30 3.54 4.27 4.76 5.16 5.22 5.31 5.32

Public GDP (at Factor Cost) 0.53 0.57 0.41 0.43 0.85 0.37 1.21 1.59 1.75 1.52

PrivateGDP (at Factor Cost) 2.39 2.80 1.90 3.11 3.40 4.40 3.94 3.63 3.56 3.81

Agriculture, forestry, fishing and hunting 0.33 0.34 0.34 0.36 0.29 0.39 0.45 0.35 0.31 0.36

Industry 0.17 -0.10 -0.60 0.12 0.68 -0.49 1.54 1.63 1.72 1.29

Extractions -0.59 -0.59 -0.72 -0.22 0.15 -0.50 0.56 0.74 1.06 0.61

Oil 0.11 0.11 -0.09 -0.38 -0.51 -0.28 -0.10 0.00 -0.05 0.02

Natural gas -0.75 -0.73 -0.67 0.12 0.63 -0.29 0.62 0.69 1.07 0.54

Other 0.05 0.04 0.04 0.05 0.04 0.07 0.04 0.04 0.04 0.05

Manufacturing 0.75 0.49 0.12 0.33 0.53 0.01 0.98 0.89 0.66 0.68

Petroleum 0.10 -0.13 0.09 -0.11 0.14 -0.04 0.04 0.33 0.12 0.15

Non-Petroleum 0.66 0.63 0.03 0.44 0.38 0.05 0.94 0.56 0.54 0.53

Services 1.20 1.88 1.36 2.06 2.67 3.50 2.43 2.39 2.37 2.72

Construction 0.31 0.43 0.52 0.48 0.39 0.71 0.43 0.62 0.53 0.70

Real Estate Rental and Services 0.56 0.31 0.43 0.49 0.33 0.80 0.36 0.28 0.44 0.46

Transportation and Warehousing 0.21 0.22 0.24 0.23 0.17 0.34 0.17 0.14 0.18 0.21

Finance 0.20 0.13 0.16 0.16 0.15 0.17 0.15 0.12 0.14 0.12

Insurance 1/ 0.04 0.02 0.03 0.03 0.03 0.04 0.03 0.02 0.03 0.03

Communication 0.22 0.16 0.28 0.32 0.47 0.47 0.17 0.18 0.18 0.23

Tourism -0.67 0.36 -0.66 0.08 0.89 0.64 0.82 0.80 0.59 0.65

Educational, Health Care, and Other Services 0.23 0.14 0.20 0.19 0.15 0.27 0.16 0.17 0.20 0.19

Utilities 2/ 0.10 0.09 0.14 0.06 0.08 0.04 0.13 0.05 0.06 0.12

Information 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01 0.01

Trade 0.71 0.52 0.69 0.70 0.50 0.87 0.47 0.53 0.55 0.51

Suez Canal 0.04 0.04 0.04 0.02 0.01 0.16 0.08 0.30 0.27 0.23

General Government 0.47 0.69 0.47 0.28 0.10 0.34 0.18 0.03 0.10 0.22


1/ Includes Social Insurance.

2/ Includes Electricity, Water, and Sewage.


Table A4: Monetary Survey and Central Bank Balance sheet (end of period, in EGP billion)

Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17

Sep-17

Dec-18

Mar-18

Jun-18

Sep-18

Monetary Survey

Net Foreign Assets 157.6 123.2 119.2 51.5 -87.4 61.1 188.6 214.1 327.9 309.5 216.9

Central Bank 76.1 38.2 37.4 25.3 -44.9 3.7 102.3 157.4 255.1 301.5 289.0

Commercial Banks 81.6 85 81.8 26.2 -42.5 57.4 86.3 56.8 72.8 8.0 -72.1

Net Domestic Assets 936.8 1172.9 1397.4 1714 2181.9 2857.1 2861.8 2988.5 3015.6 3144.8 3332.4

Net Claims on Government 568.2 790.6 1038.9 1333 1602.7 1808.9 1815.7 1917.9 1866.8 1971.6 2125.2

Net Claims on Public Eco-nomic Authorities

10.5 11.9 6.3 -41.5 52.2 170.7 185.3 208.3 217.6 245.9 256.1

Claims on Public Sector Companies

40.6 42.9 45.4 63.2 93.1 148.7 149.8 155.2 162.4 160.2 164.4

Claims on Private Sector 453.3 497.7 534.5 623.6 712.1 982.9 977 998 1030.3 1082.6 1098.3

Net Other Items -135.8 -170.3 -227.7 -264.2 -278.2 -254.1 -266.1 -290.8 -261.4 -315.5 -311.6

Broad Money (M2) 1094.4 1296.1 1516.6 1765.5 2094.5 2918.2 3050.4 3202.7 3343.5 3454.3 3549.3

Local Currency Component (M2D)

908.4 1071.9 1280.5 1502.5 1770.7 2223.9 2385.1 2523.6 2649.8 2737.4 2821.1

Currency Outside Banks 194 241 270.9 292.7 346.9 419.1 416.1 407.8 416.5 438.9 443.5

Local Currency Deposits 714.3 830.9 1009.7 1209.8 1423.8 1804.8 1969 2115.8 2233.3 2298.5 2377.6

Foreign Currency Deposits 186 224.2 236.1 263 323.8 694.3 665.2 679 693.7 717.0 728.2

Central Bank Balance sheet

Net foreign assets 76.1 38.2 37.4 25.3 -44.9 3.7 102.3 157.4 255.1 301.5 289.0

Foreign assets 92.2 101.7 115.8 148.1 149.9 551.5 630.5 643 732.5 776.0 782.0

Foreign liabilities -16.1 -63.4 -78.4 -122.8 -194.8 -547.8 -528.2 -485.6 -477.4 -474.5 -493.0

Net domestic assets 187.6 279.7 327.1 460.6 522.9 573.9 484.4 489 422.6 414.8 415.8

Net claims on government 176 310.4 433.6 585.4 658.3 740.5 742.3 682.4 652.8 730.6 789.8

Net claims on public eco-nomic authorities

-10.6 -10.6 -14.4 -61.5 -38.9 -31.8 -23 -15 -15.9 -15.1 -8.8

Claims on Banks 22.3 27.3 25.3 25 120.4 286.9 294.9 291.1 332.1 326.0 295.9

Bank's Deposits in Foreign Currency

-25 -33.1 -34.3 -51.4 -60.8 -129.7 -129.8 -122.5 -119.3 -124.6 -126.0

Open Market Operations /1 33 -4.8 -44.3 0 -150 -467.9 -595.5 -560.5 -668.3 -677.5 -735.8

Other items net -8.1 -9.5 -38.8 -37 -6.1 176 195.4 213.4 241.2 175.4 200.7

Reserve money (M0) /2 263.7 317.9 364.5 485.9 478.1 577.6 586.6 646.4 677.7 716.3 704.8

Currency Outside Banks 194 241 270.9 292.7 346.9 419.1 416.1 407.8 416.5 438.9 443.5

Reserves of banks 69.6 76.9 93.6 193.2 131.2 158.5 170.5 238.6 261.2 277.5 261.2

Cash at vaults 10.8 19.8 17.8 20.8 21.6 33 33.9 31.6 31.5 43.7 37.7

Deposits in local currency 58.8 57.1 75.8 172.4 109.6 125.5 136.6 207 229.7 233.8 223.5


1/ Deposit auctions and deposit facility.

2/ Reserve money at end of June 2015 was affected by cancellation of deposit renewals at CBE due to unexpected announcment of national holiday on June 30,2015.


Table A5: Market Developments

Oct-16

2017-Q1

2017-Q2

2017-Q3

2017-Q4

2018-Q1

2018-Q2

2018- Q3

Nov-18 1/

Latest Vs. Oct. 2016, in bps 2/

Policy Rate

Mid-Corridor Rate, % 12.25 15.25 16.16 19.09 19.25 18.77 17.25 17.25 17.25 500

Interbank Market

Interbank WAR,% 11.91 15.45 16.58 18.99 19.04 18.41 17.04 17.01 16.92 502

Interbank O/N rate, % 11.89 15.33 16.62 18.93 18.95 18.36 16.99 16.95 16.88 499

Interbank O/N average volume, EGP million 1,799 3,629 5,409 5,014 3,948 5,341 9,119 7,738 16,000 14,200

Interbank O/N share of total interbank volume, % 62.90 51.4 54.1 72.2 69.2 78.4 74.9 75.0 84.7 2177

Banking Sector

Deposit Rates, % 9.27 12.60 13.10 15.07 15.37 14.14 12.72 12.90 n/a 363

Time, % 9.03 10.96 11.96 14.05 14.16 13.44 12.17 12.57 n/a 353

Short-term Deposits (<1Y), % 8.98 10.89 11.88 13.98 14.22 13.44 12.18 12.47 n/a 349

Other Deposits, % 10.53 12.86 13.59 15.00 12.95 13.36 11.94 13.29 n/a 276

Saving, % 12.20 18.49 18.48 18.90 19.04 18.02 15.15 14.86 n/a 267

< 3 years, % 11.66 19.84 19.86 19.94 19.95 19.46 16.07 13.17 n/a 151

> 3 years, % 12.21 15.28 14.82 15.36 14.92 14.95 15.13 14.88 n/a 267

Saving Accounts, % 7.98 10.32 9.94 9.65 10.17 10.07 10.19 8.72 n/a 74

Lending Rates, % 14.38 16.94 17.28 19.10 19.11 19.03 17.88 17.01 n/a 263

W.A. Business Lending Rates, % 14.96 16.91 17.36 19.09 19.13 19.10 17.86 16.76 n/a 180

Short term business, % 14.92 16.94 17.44 18.86 19.19 19.11 17.74 17.22 n/a 229

Long term business, % 15.08 16.87 17.22 19.65 18.98 19.08 18.03 15.75 n/a 67

Retail, % 13.66 17.15 16.78 19.20 19.01 18.72 18.02 18.03 n/a 437

Local Debt Market 17.0

T-Bill yield 1Y, % 16.45 19.40 19.69 19.78 17.99 17.00 17.75 19.13 19.78 333

W.a T-bill yield, % 15.79 19.29 19.72 19.86 18.41 17.60 18.12 19.24 19.65 386

W.a T-bond yield, % 17.22 17.12 17.85 17.11 15.68 15.04 15.65 17.88 18.04 82

WACF, % 3/ 12.72 15.37 15.71 15.76 14.56 13.94 14.37 15.33 15.66 294

Spreads 3/

O/N interbank - Mid Corridor rate, % -0.36 0.08 0.46 -0.17 -0.30 -0.41 -0.26 -0.30 -0.37 -1

W.a. Lending rate - Mid Corridor rate, % 2.13 1.69 1.12 0.01 -0.14 0.26 0.63 -0.24 n/a -237

Mid Corridor - W. A Deposit Rate, % 2.98 2.65 3.06 4.02 3.88 4.63 4.53 4.35 n/a 137

WACF - Mid Corridor rate, % 0.47 0.12 -0.45 -3.33 -4.69 -4.82 -2.88 -1.92 -1.59 -206

W.a. Yield Curve, % 1.14 -1.73 -1.50 -2.20 -2.19 -2.05 -1.97 -1.08 -1.29 -243

W.a. Lending rate - WACF, % 2.24 1.54 1.65 3.33 4.56 5.16 3.49 1.43 n/a -80

W.a. Lending rate - T-bill yield, % 1.75 1.48 1.59 3.20 4.40 5.02 3.36 1.37 n/a -96

W.a. Lending rate - W.A. Deposit rate, % 5.12 4.35 4.18 4.03 3.74 4.89 5.15 4.11 n/a -101

Long term Business - Short term Business lending, % 0.16 -0.07 -0.22 0.79 -0.21 -0.02 0.29 -1.47 n/a -163


1/ Up to November 15, 2018.

2/ All changes are in basis points with the exception of Interbank o/n volume, the changes are in EGP million.

3/ Government securities' yields are adjusted for tax.


Abbreviations

bps Basis points

CBE Central Bank of Egypt

CIC Currency in circulation outside the banking system

CPI Consumer price index

EGP Egypt Pound

F/C Foreign currency

GDP Gross domestic product

L/C Local currency

m/m Month on month

M0 Reserve money

M2 Broad money

O/N Overnight

p.p. percentage points

US United States

USD United States Dollars

w.a. Weighted average

WACF Weighted average cost of finance of the Treasury’s L/C marketable securities

y/y Year on year


Documents

Central Bank of Egypt...Monetary Policy Report III / 2018 | Central Bank of Egypt 5 Figure 7 Contribution to the Current Account (in p.p., y/y unless otherwise specified) 2016 Source: