EconSource: Egypt Seen Raising Interest Rates as Pressures Mount

Rising yields on Egyptian treasuries signal the market is expecting the Central Bank of Egypt (CBE) to raise interest rates this month to dampen inflation and ease mounting pressure on the currency, bankers and economists say. Egypt cancelled a treasury bond sale on Monday as yields soared, with banks apparently unwilling to fund increasingly expensive and risky borrowing. The CBE raised interest rates by 50 basis points in December. However the move did not immediately feed into treasury yields as state-owned banks bid down rates at regular auctions to minimize the cost of government borrowing, bankers said. The Monetary Policy Committee (MPC) kept rates on hold last month. Economists expect it will hike rates at the next meeting on March 17. “The yields on treasuries… are signalling that the market is expecting a hike in interest rates in the upcoming MPC meeting, which in our view is definitely the expected direction in 2016,” said Senior Economist at CI Capital Hany Farahat. [Reuters, 3/1/2016]

Egypt to double natural gas production by mid-2017
Egypt will double its natural gas production by the second quarter of 2017 as a result of discoveries made in 2015, Prime Minister Sherif Ismail said Tuesday. Italian oil and gas company Eni made discoveries of gas in August 2015 that reach a potential of 15 billion cubic feet in Egypt’s Delta region. The upsurge in production will contribute to advancing development projects in different fields including industrial sector, Ismail said. He also said the upcoming period will require an increase in the resources available to the state budget. “There is no substitute for reform, especially in the administrative field, in order to achieve our development goals,” he said. [Aswat Masriya, 3/2/2016]

Tunisia sees 0.8 percent economic growth in 2015
Tunisia’s economic growth stood at 0.8 percent in 2015, above estimates of 0.5 percent, according to the Central Bank of Tunisia (BCT). A slowdown in growth in the last quarter of the year occurred “due to the decline in the added value of the main sectors, particularly non-manufactured industries, market services, and manufacturing industries,” the BCT said. Meanwhile, the unemployment rate increased by 0.1 percent in the fourth quarter of 2015 to 15.4 percent. The unemployment rate for university graduates decreased by 0.8 percent but remained high at 31.2 percent. The BCT also said that Tunisia’s trade deficit fell by 40.6 percent in January compared to the same period last year. [TAP, 3/1/2016]

UAE bank says dollar supply tight after oil drop
The National Bank of Abu Dhabi, the United Arab Emirates’ (UAE) largest bank, said the country is facing a reduced supply of dollars. “There is a dollar shortage,” Chief Executive Officer Alex Thursby said Wednesday. “It’s not a crisis, but it is tightening,” he said. He said in October last year that government deposits in the UAE slumped by more than $13 billion after the drop in global oil prices. Banks in the UAE are facing deteriorating conditions as lower crude leads to a decline in government spending, slower economic growth, and falling asset quality, according to Standard & Poor’s. “Lower oil proceeds [have] led to an important drop in government bank deposits,” said Philippe Dauba-Pantanacce of Standard Chartered Plc in London. [Bloomberg, 3/2/2016]

Moody’s says Turkey’s economic growth outlook stronger
Moody’s ratings agency said Wednesday that Turkey’s economic growth outlook remains strong. “The first pillars that drove the affirmation are the size, strength, and the diversity of its economy, and the fact that its growth prospect relative to other large emerging markets still remains robust,” Moody’s Vice President and Senior Credit Officer Alpona Banerji said. He said the ratings agency expects Turkey’s growth to reach 3.4 percent in 2016 based on “the strong carry-over effect from last year, the consumption growth driven by the minimum wage increases, and some support from net export contribution driven from trade with Europe.” He noted, however, that “geopolitical risks remain” and domestic security issues could affect tourism, consumer confidence, and consumption. Turkey’s substantial current account deficit is also concerning. “There has been a substantial rebalancing on [the] current account deficit mainly led by the oil price decline, but capital account financing remains volatile and a vulnerability,” Banerji said. Moody’s also expects the Turkish lira to remain weak against the US dollar for at least the next 12 months. [Hurriyet, 3/2/2016]

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