Beltone Financial forecasted an average estimated headline inflation of 17.8% in the fiscal year (FY) 2018/19, pushing interest rate cuts to FY 2019/20, which will keep purchasing power low. They expected a fourth cut in subsidies by the first quarter of 2019, with a slight increase in energy prices (average 20.6%). For the Egyptian pound, Beltone expects a stable local exchange rate in FY 2018/19, as pressures seem subdued with solid foreign exchange inflows, and adequate Central Bank of Egypt's (CBE) net fixed asset (NFA). The services sector will continue to outperform in FY 2018/19, with a rise in tourism revenues to $11.1bn. This, coupled with an improving net oil balance, given the halt in natural gas imports starting January 2019, will support a reduced current account deficit. Moreover, reforms will drive a better than budgeted primary balance—2.4% of the GDP—yet high yields will continue to weigh on fiscal balance improvement. Tax revenues will continue their growth momentum, rising by 34% year-over-year to EGP 758bn in FY 2018/19. Meanwhile, EGP 32bn savings from the oil subsidies bill will provide enough funds for social and investment spending. This will improve the primary balance to the GDP, above the government target of 2%. Yet, Beltone foresees a higher interest payment burden of EGP 631bn in FY 2018/19, an increase of EGP 193bn from the previous year, and above the budgeted figure of EGP 541bn on the back of higher T-bill yields, which will stay above 19%. According to Beltone's vision "interest rate cuts, state initial public offerings, and indexes rebalances as key triggers for a bull cycle in 2019." Egypt offers the highest earnings per share growth in the Middle East and North Africa, as well as attractive valuations, making Egypt poised for a re-rating in 2019.
