Morgan Stanley Cautiously Optimistic on Egypt’s Growth

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Morgan Stanley’s baseline scenario projects that Egypt’s inflation rate will decline to 14.5% by the end of 2025.

Morgan Stanley has highlighted a sense of cautious optimism among local market players regarding Egypt’s economy following its recent visit to Cairo. During the visit, representatives from the U.S. investment bank met with policymakers and economic experts to assess overall economic expectations and compare them with the bank’s sector-specific forecasts, according to a research note reviewed by Enterprise.

Morgan Stanley’s baseline scenario projects that Egypt’s inflation rate will decline to 14.5% by the end of 2025. This is slightly lower than the 16-18% range expected by local market players. Local analysts express less optimistic expectations, citing concerns about additional fiscal measures that could fuel inflation. These include further increases in energy prices and the potential removal of some VAT exemptions in line with IMF program requirements, according to the report.

Analysts anticipate that the government will implement two more fuel price hikes in 2025, leading to a cumulative increase of 20-30%. Local analysts expect inflation to slightly slow down to 24% in January, supported by the recent decline in fruit and vegetable prices. However, they caution that strong consumer demand during Ramadan will likely drive monthly inflation acceleration in February and March. Despite this, strong base-year effects from 2024 will contribute to a gradual decline in annual inflation to 14-15%, according to Morgan Stanley. Morgan Stanley anticipates significant interest rate cuts by the Central Bank of Egypt (CBE) this year.

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The bank expects a 200 basis-point rate cut this month, bringing the overnight deposit rate to 17.25% by the end of 2024, a total reduction of 1,000 basis points from its current level.