Goldman Sachs says Turkey is no longer economic competitor to Egypt

CAIRO – 21 September 2020: Independent Arabia highlighted on Saturday the main features of Goldman Sachs' report on Egyptian economy released on September 16.

The institution underlines that the Egyptian economy is both robust and steady, and that it is still achieving real growth. As such, it is one of the strongest among emerging economies.

The report adds that Turkey is no longer a competitor of Egypt because of its deteriorating conditions, which pushes away investors. Goldman Sachs affirmed that Egypt is the best among its peers in terms of "real revenues."

The institution speculates that Egypt's tourism sector will revive in the third quarter of 2021. The sector composes 20 percent of the total economic activity, and was negatively influenced by the COVID-19 crisis.

Although investments worth $20 billion exit the country between March 2020 and June 2020, Goldman Sachs estimates that others worth $10 billion entered. It also speculates that the expats' remittances will improve, after they had declined due to the crisis.  

Goldman Sachs suggests the Egyptian pound will remain strong and ascending in light of speculations that foreign cash flows will continue. As for the impact of that on competitiveness, the institution estimates no risks on exports recommending further investments in the sectors of R&D and capacity building. The exchange rate is now LE15.73 for $1.  

Goldman Sachs indicated that the Egyptian real interest rate and debt yield standing at 6.5 percent and 6.7 percent, respectively, are among the most attractive worldwide compared to the one percent and 0.5 percent offered by other emerging states.

Egypt's interest rates for deposit and lending have been standing at 9.25 percent and 10.25 percent since March.

Although the institution speculated that the Central Bank of Egypt (CBE) will gradually reduce interest rates, and that will have no impact on foreign cash flows.

Early in September, Moody's Investors Service kept Egypt's credit rating at B2 with a stable outlook. It also indicated that Egypt ranks third among emerging markets in terms of agility and adoption of right economic policies.

In the same month, Moody's reduced Turkey's credit rating to B2 with a negative outlook down from B1 with a negative outlook in June 2019. In August, Fitch indicated a negative outlook while keeping the rating at BB- as it has been since November 2019.  

Fitch's reasons are the decline in Turkey's foreign reserves from $105.7 billion in 2019 to $88.2 billion this year, the rise in financial risks, and the weak financial policy.

Fitch estimated that the net Turkish debt will hike by eight times by 2025 as capital investments are focused in the sectors of energy, mining, and petrochemicals.

Turkey declared that the inflation rate in August 2020 recorded 11.77 percent compared to August 2019. In the same month, the U.S. dollar rose against the Turkish lira three times to be 7.45 lira for $1.