In addition to an easing in monetary policy, the Egyptian economy, according to EFG Hermes, will benefit from: a) further recovery of the tourism sector, especially with strong indication of resumption of flights from Russia; b) increased natural gas production, as Zohr field commences production in December; c) recovering purchasing power as wage growth gradually narrows the gap with inflation and uncertainty subsides; and d) further local
currency appreciation, though EFG Hermes maintains its view that LE 17 is likely to be a ceiling for such appreciation.
A lack of progress on promised fiscal stimulus implementation, low inflation and foreign
currency appreciation are the main factors causing the weakness of US dollar in 2017, a QNB report says.
It clearly translates into erosion in margins between six to seven per cent only on account of
currency appreciation and the trend is likely to continue on the back of robust inflows in the stock market.
The ratings agency pointed to rising levels of foreign exchange reserves, a return to private capital inflows and
currency appreciation point as progress in Egypt's external rebalancing.
A regime limiting
currency appreciation is expected to be removed in the middle of this year.
The report cautions that increased capital inflows could lead to
currency appreciation, which would undercut economies heavily reliant on exports and contribute to deflationary pressures.
Savings from lower oil prices-following energy subsidy reforms, most countries now pass through changes in global oil prices to domestic retail fuel prices are also supporting consumption, offsetting slowing remittances due to lower flows and
currency appreciation against the euro.
5% CAGR in US dollars due to some
currency appreciation compared to the dollar through to 2020 after the strong depreciation occurred in 2015).
This concern has been reflected, for example, in complaints about intervention by China and other emerging markets to prevent
currency appreciation.
On the one hand, it may reflect the "fear of floating" identified by Calvo and Reinhart (2002), which has been shown to be asymmetric in periods of
currency appreciation and depreciation in emerging market economies.
In our assessment, economies that have healthier balances and stronger growth prospects should continue to see
currency appreciation over the long term, while those with imbalances are more likely to face strains.
To answer this question, we first examine the impact of a host country's currency depreciation on a foreign subsidiary's intra-firm product sales to its affiliates in other countries undergoing a
currency appreciation.
