Egypt is a country of 110m people with low banking penetration across the country. A historically cash driven economy the last 2 years have seen a huge uptick in digitalisation.
However, rural areas are still incredibly lacking in access to financial services - mainly served by community credit union banks.
Headwinds:
- Egypt have high vulnerability to external shocks - energy rising prices and food prices have soared
- Central bank policy has been poor - New Central bank governor but expect more of the same
- IMF deal has driven devaluation - The currency seems semi-flexible with some state bank management of the currency.
- Drying up of portfolio inflows - restricting access to FX
- Since the devaluation there has been some return of portfolio inflows but a previous peak of $30bn monthly inflows in March 2021 has now fallen to $17bn as of September $17bn
- Historically Egypt is in the bottom Qrty of the easiest countries to do business in
- Egypt has pushed hard on increasing the ease of business to drive long term FDI & debt security
- Despite progress the estimate for this fiscal year is a 6.1% of GDP budget deficit
- Inflation is running at 19% for core inflation for October driven by net import of energy & food - 11.25% interest base rate
Tailwinds:
- Historically Egypt has had low levels of consumer indebtedness
- This is culturally changing with growing access to car loans, mortgage loans & credit cards
- Strong belief that another devaluation is both likely and imminent.
- Huge uptick in digital adoption and release of the first central bank fin-tech licences
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