In its latest meeting, the Central Bank of Egypt (CBE)’s Monetary Policy Committee decided to maintain the current key interest rates. The bank noted that “the current monetary stance is appropriate to support the sustained moderation of inflation.”
The overnight deposit rate remained at 27.25 percent, the overnight lending rate at 28.25 percent, and the rate of the main operation at 27.75 percent. The discount rate was also held steady at 27.75 percent.
Slowing GDP growth in Q1 2024
According to the official release from the CBE, Egypt’s real GDP growth had slowed to 2.2 percent in the first quarter of 2024, down from 2.3 percent in the previous quarter. The bank attributed this decline to the impact on the services sector from ongoing geopolitical tensions and disruptions in maritime trade.
Leading indicators for the second quarter suggested continued economic sluggishness, projecting a slowdown in GDP growth for the fiscal year 2023/2024. However, the growth is expected to recover in the following fiscal year.
Marginal improvement in unemployment rate
Positively, the unemployment rate had improved marginally to 6.7 percent in the first quarter of 2024, down from 6.9 percent in the fourth quarter of 2023.
Easing inflationary pressures
The CBE highlighted that inflationary pressures in Egypt had shown signs of easing, with both headline and core inflation rates decreasing for the fourth consecutive month. In June 2024, annual headline inflation stood at 27.5 percent, while core inflation was at 26.6 percent. Food inflation had dropped significantly to 31.9 percent in June from a peak of 73.6 percent in September 2023, indicating improved market dynamics.
Global economic outlook and monetary policy tightening
Globally, the Monetary Policy Committee (MPC) noted a positive but moderated economic growth outlook, influenced by ongoing monetary policy tightening in advanced and emerging market economies. This tightening had contributed to a decline in global inflation rates, prompting some central banks to adjust rates downwards recently.
However, the MPC emphasized that due to uncertainties over inflation trends and persistent risks, major central banks are expected to maintain a cautious stance on monetary policy. Prices of key commodities like energy had decreased recently due to reduced global demand, but geopolitical tensions continued to pose potential threats to commodity supply stability.
IMF’s revised growth projections for Egypt
According to an International Monetary Fund (IMF) report released on Tuesday, global inflation was anticipated to ease to 5.9 percent in 2024, down from 6.7 percent in 2023, despite developing inflationary pressures and geopolitical tensions.
The IMF’s report also revised Egypt’s growth projections, expecting growth of 2.7 percent in fiscal year 2024/2025 and a slightly improved 4.1 percent in fiscal year 2025/2026, a downgrade from earlier projections of 3 percent and 4.4 percent, respectively. Globally, growth projections remained stable at 3.2 percent for 2024 and 3.3 percent for 2025.
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