By: Heba El-Kordy
Cairo – Mubasher: The recent increase in Turkish interest rates will weigh on the Egyptian economy in the coming period particularly after emerging markets' (EM) volatile performance during 2018. Egypt has sought to counter this turbulence, unlike its EM peers.
The Egyptian reform programme is expected to shield the economy from these risks and maintain investment stability, analysts and economists stressed.
Higher Turkish interest rates may raise pressures on the Egyptian economy, which will force the government to hedge against that.
Last week, the Central Bank of the Republic of Turkey (CBRT) announced a major increase to interest rates, raising rates to 24% from 17.75%, exceeding analysts’ forecasts of a 22% hike.
Despite Turkey's rate hike, Egypt can still countermeasure against the resulted risks, Mahmoud El Masry, macroeconomics analyst at Pharaohs Research said.
Foreign investors usually invest in stable markets, El Masry highlighted, pointing out that the Egyptian economy was more stable than its Turkish counterpart. However, he projected that some foreign investments will exit from the North African nation within the next few months and shift their investments to Turkey.
For his part, head of Research at SHUAA Securities Egypt Amr El Alfy expected the Egyptian pound to see some pressures on the short-term on the back of the Turkish rate hike.
These pressures will limit the Central Bank of Egypt's (CBE) powers to carry on facilitating its monetary policy, which it had commenced in February 2018, El Alfy added.
The Egyptian government needs to be ready to hedge against any risks resulting from the EM crunch and to develop new measures to bolster foreign and local investments, he indicated.
El Alfy emphasised that the Arab world's most populous country will be the least affected by the currently fluctuating EM landscape owing to its ongoing economic reform programme.
Translated by: Mai Ezz El-Din
