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CAIRO – 27 February 2018: Beltone Financial said in a recent report that the decline in the Egyptian inflation supports a more expansive monetary policy.
Beltone expected that direct foreign investments and the recovery of consumption rates will lead the growth rates of fiscal year 2017/2018.
The report further expected that the budget deficit will decrease to 10 percent of gross domestic product (GDP) which will require the accumulation of foreign debt due to the stability of local currency deposits at 35 percent in the fiscal year 2016/2017.
According to the report, oil prices will increase to reach $63 per barrel in fiscal year 2017/2018, which creates a challenge for reducing energy subsidies, and calms the pace of reducing the budget deficit, as it reflects on the foreign borrowing increase.
The financial company added that the Egyptian exchange index is trading at attractive levels despite the low traded volume. It clarified that the improvement of the profits would be a main incentive to the market.
Beltone announced its support to invest in companies that provide specific attractive opportunities, with some companies favoring the sectors of consumer goods, construction, fertilizers and real estate.
For the banking sector, the report said that cutting interest rates and extending asset maturities are the main avenues for banks to reduce the expected contraction in interest margins.
The Central Bank of Egypt lowered the interest rate by 1 percent on February 15, as the inflation rates continue going downhill for the first time since November's flotation.
The bank cut its overnight deposit rate to 17.75 percent from 18.75 percent and its overnight lending rate to 18.75 percent from 19.75 percent.
The Central Agency for Public Mobilization and Statistics (CAPMAS) stated that Egypt’s annual inflation declined to 17 percent in January 2018.
For the current fiscal year, the budget deficit is estimated to record LE 370 billion ($21 billion), planned by the ministry to be financed through treasury bills and bonds, as well as through international and Arab loans.