The Monetary Policy Committee (MPC) of the Central Bank of Egypt (CBE) is expected to convene on Wednesday to review the key interest rates, the third meeting to be held in 2021. The MPC meeting was scheduled on 29 April, yet the CBE decided to reschedule it to be a day earlier in response to the prime minister's decree that made Thursday a paid day off to commemorate the 39th anniversary of Sinai Liberation Day. In the last two meetings, held in February and March, the MPC decided to maintain the CBE's current key interest rates, driven by the inflation figures that were in the range limit set by the CBE at 7 percent (±2 percent) on average in the fourth quarter of 2022, and the recent global economic developments. The CBE's overnight deposit rate, overnight lending rate, and the rate of the main operation remained unchanged at 8.25 percent, 9.25 percent, and 8.75 percent, respectively. The discount rate was also kept unchanged at 8.75 percent. Egypt's annual headline inflation increased slightly in March to reach 4.8 percent, up from 4.6 percent recorded in March 2020, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). Headline monthly inflation also increased by 0.6 percent in March to reach 110.9 points, up from 110.3 points in February, according to CAPMAS. Meanwhile, the CBE's inflation calculations — announced on Thursday — showed that the annual headline inflation rate remained stable at 4.5 percent in March 2021. Yet, monthly headline inflation increased to 0.5 percent in March 2021, up from 0.4 percent in the same month of 2020, according to the CBE. Accordingly, the annual headline inflation rate rose to 3.7 percent in March 2021, up from 3.6 percent in February 2021, according to CBE. Egypt is targeting a 5.6 percent inflation rate in the current FY2020/2021, which ends in June, and 6 percent in FY2021/22, according to the FY2021/22 draft budget announced by the planning and economic development minister on Monday. According to the International Monetary Fund's (IMF) projections for the Egyptian economy, announced in April, the country's real GDP growth is expected to deaccelerate to 2.5 percent in 2021, down from 3.6 percent in 2020, before rebounding by around the double to reach 5.7 percent in 2022. Egypt's inflation rate is projected to decline to 4.8 percent in 2021, down from 5.7 percent in 2020, before soaring back up to 7.2 percent in 2022, according to the IMF. Moreover, the IMF said that the country's current account balance is expected to continue to see negative performance estimated at -4 percent in 2021 and 2022, compared to -3.1 percent in 2020. Egypt is also expected to witness an increase in the unemployment rate, reaching 9.8 percent and 9.4 percent in 2021 and 2020, respectively, up from 8.3 percent in 2020, according to the IMF. In its recent report, Belton Financial Holding expected the CBE to keep current interest rates on hold owing to the recent inflation rate developments, the stability in food stuff prices, the increase in global oil prices, and the rise in the global interest rates. Meanwhile, HC Securities & Investment expect the CBE to keep interest rates unchanged in light of the recent inflation figures. Through the end of 2021, HC projected Egypt's monthly headline inflation to average 0.9 percent m-o-m and the annual headline inflation to jump to 6.7 percent owing to the rising international commodity prices and a possible pick-up in economic activity following the successful rollout of the COVID-19 vaccine. Looking at the results of recent government T-bill auctions, HC said it believes that foreign portfolio inflows are gradually regaining momentum as evident in the high coverage and possibly the beginning of a cool-off in yields from accelerated increases witnessed over the last couple of months. In March, Fitch Solutions excluded Egypt from the markets that are expected to see positive indices in 2021 regarding inflation, commodity prices, reforms, and the vaccines' roll out. The IMF is expected to complete its second and last review on its 12-month stand-by agreement (SBA) programme with Egypt in May, through which Egypt will receive $1.6 billion. Under the programme, IMF approved a $5.2 billion loan for Egypt — as per Egypt's request — to finance the country's second wave of economic reforms that focus on executing structural reforms. So far, Egypt has received two tranches of the loan amount to $3.6 billion. In March 2020, the CBE slashed key interest rates by 4 percent as a result of the severe impacts of the COVID-19 pandemic outbreak.
