Egypt is a vibrant economy of 100 million people and the gateway to Africa. It is finally beginning to reap the long-term benefits of the ongoing economic reform plan, based on better fiscal balances requiring tax rises and cuts to energy subsidies amongst other measures alongside a freely floating currency. Progress will not be along a straight road, with business activity actually slowing in February, but the trajectory is firmly in the right direction.
Despite the impact of higher inflation, global financial institutions expect positive results over the medium and longer term. Jihad Azour, Director of the Middle East and Central Asia at the IMF, said only last month that the reform measures implemented have made Egypt a favourite destination for investment, despite the economic challenges facing the world economy. In Rand Merchant Bank’s annual Africa report, Egypt retained the top spot as the most attractive investment destination across the continent for the second year in a row. BP’s Chief Executive Bob Dudley recently said that they have invested more in Egypt in the last two years than anywhere else.
With high interest rates local businesses, in particular, will find committing to much needed capex challenging. But the Government’s investment programme, while absorbing significant liquidity, is delivering improvements to some critical areas of infrastructure. With more positive investor sentiment towards emerging markets returning, the IPO pipeline also looks more robust. This will be a mixture of state sponsored transactions and private companies looking for visibility and capital to expand domestically and internationally. Listings will be in Cairo as well as London.
How is all this playing out in the global discussion around sentiment towards the Egyptian economy? Our ‘HS Insights’ team has analysed all English language online media and social media mentions across the globe over the last six months in relation to the Egyptian economy (which is set out in the chart below). This shows that interest is overwhelmingly focused on the economic reform programme. Recent peaks have been triggered by a positive IMF report last November and a Standard Chartered report in January that they expect Egypt to be ranked 7th amongst the world’s top 10 economies by 2030. Inflation continues to be a registering topic but has much less prominence than six months ago. Privatisation, inward investment and economic stability get virtually no mentions.
Overall Hudson Sandler is even more positive than eighteen months ago, when we opened for business in Cairo, about the outlook for this great and fascinating country. Last month the Central Bank unexpectedly cut the deposit rate, its first such move in almost a year, as inflationary pressures eased and investor inflows recover. The economic backdrop has positive momentum, and we much look forward to helping to tell Egypt’s compelling investment story internationally over the coming years.
Andrew Hayes is Managing Partner at Hudson Sandler and also leads its emerging market franchise. He has had a life long love of Egypt and led the opening of our Cairo office in January 2018. Hudson Sandler is also proud to have a strategic partnership with Inktank Communications, the region’s leading IR and PR consultancy.