The Director of the International Monetary Fund expected that the year 2023 would be a difficult year, due to the slowdown in the main economies driving economic growth in the world, which are the United States, the European Union and China, and experts expected that the fund would reduce its expectations for the global growth rate for the current year during its data that it will publish this month on the rate that He previously reduced it last October to 2.7%, compared to 3.2% for growth in 2022.

On the other hand, many expected the continuation of the Russian-Ukrainian war with its negative effects on fuel and food prices and the movement of commodity supplies, as well as the continuation of the United States, the euro countries and Britain in raising interest during the current year, as the difference between inflation rates and interest rates is still wide. In the United States, inflation is still 7.1% and interest is between 4.25% and 4.50%, while it aims to reach inflation of only 2%.

In the euro area, inflation reached 10.1% and interest is 2.5%, and in the United Kingdom, inflation is 10.7% and interest is 3.5%, which is repeated in many countries such as Australia, which has inflation of 7.3% and interest of 3.1%. On the other hand, tension between the United States and China is expected to continue, both because of Chinese support for Russia, the Taiwan problem, or China's trade growth, as well as the continuation of US, European, and Japanese sanctions against Russia.

Pictures of Egypt's benefit from the Russian crisis

Thus, these previous factors constitute the ground that the Egyptian economy will deal with during the new year, with its difficulties and opportunities, as the repercussions of the Russian-Ukrainian war caused an increase in energy and food prices in Egypt, but at the same time it allowed an increase in the revenues of the Suez Canal due to the large quantities of energy passing through Gulf and South Asia to Europe through the channel to compensate for the lack of supplies from Russia to Europe.

The Suez Canal also benefited from the high oil prices, prompting oil tankers to cross through it to reduce the cost of fuel after they used to prefer the Cape of Good Hope route, especially when they return to Asia empty to save transit fees. Egypt also benefited from the lack of Russian gas to Europe to increase its exports of liquefied natural gas. For Europe during the past year, it also benefited from the lack of Russian production of fertilizers due to the European ban on it by increasing fertilizer exports and is currently seeking to take advantage of the expected cold weather in Europe during the winter to attract part of European tourism during the winter.

Egypt also benefited from China's endeavor to expand its influence on the African continent to attract a measure of borrowing from it to compensate for the lack of dollar resources in it, until China became the third source of Egyptian external debt among the countries of the world until last June after the UAE and Saudi Arabia, which means that it exports debts from foreign countries by about 7.5 billion dollars, of which 2.7 billion dollars is in the form of currency exchange, and Egypt is currently seeking to issue bonds in Chinese yuan, about half a billion dollars.

Thus, the previous international factors will affect the economy during the current year in terms of high interest rates, which makes it difficult to try to issue bonds in the international markets, which led to its inability to offer Egyptian bonds in the international markets last year, despite the severe shortage of dollars in it.

The rise in international interest rates will also push to seek to raise the local interest on the Egyptian pound in an attempt to defend the pound to attract depositors toward it with a higher interest rate than the interest on international currencies, as well as an attempt to attract a measure of hot money to contribute to bridging the acute shortage in dollars.

Specific local factors for the situation in the new year

However, there remain pressing local factors that will shape the features of the performance of the Egyptian economy during the current year, most notably the exchange rate of the pound against the dollar, inflation rates, and the role of the private sector in the economy in light of the dominance of public and sovereign authorities over economic activity, and all this within the framework of commitment to the demands of the International Monetary Fund identified by its agreement with Egypt accompanies the new $3 billion loan, which is paid in 8 semi-annual installments, with payment linked to the extent of commitment to fulfilling its demands.

The first of these demands is the flexible exchange rate, that is, abandoning the policy of administrative intervention of the Central Bank in determining the exchange rate, which it has returned to practice during the past two months despite its announcement in late October of following a flexible exchange rate policy, and from here a new reduction in the exchange rate of the pound is expected. In front of the dollar, which currently stands at 24.7 pounds to the dollar, to catch up with the price of the dollar on the black market, which is 32 pounds, with this reduction having negative repercussions on commodity prices in the Egyptian markets that were already stagnant in recent years.

Likewise, the Egyptian authorities have accelerated the release of goods accumulated in ports since last February, a process that may take several months and its completion depends on the availability of dollars in banks for their release, and this is accompanied by bank financing for new import operations that are expected to increase after the return of the collection documents system that facilitates the Importers import operations compared to the documentary credits system.

The return of the import system through collection documents will prompt reliance on the black market to procure dollars to pay advances for the value of imported deals to suppliers abroad, and therefore the black market will continue to exist until the market is sure of the banks’ ability to finance the release of goods held at ports, as well as new import operations, which is a critical matter. The difficulty for banks in light of the large dollar deficit associated with its repayment due to the arrival of support loans from countries and international and regional institutions.

There is also a process of selling shares of public and private Egyptian companies to Gulf sovereign funds. Therefore, a boom is expected in the sale of shares in Egyptian companies and banks to Gulf investors through the Egyptian Sovereign Fund, and we may witness the sale of shares of two companies affiliated with the army that were announced years ago without implementation.

In addition to theses through the Stock Exchange, which led the government through its financial portfolios in the Insurance and Endowment Authority, Post and Public Banks, to push it to rise in the last quarter of last year in order to be ready for these theses at better prices.

More foreign borrowing during the year

The repercussions of decreasing the exchange rate of the previous pound last year, as well as the exchange rate on the black market, will cause prices to rise, as many activities price their products according to the prevailing price on the black market, such as car companies, gold, durable goods, and others, which will push the central bank to further raise interest. Which in turn will increase the cost for the producing companies, which will affect the competitiveness of their exports or their internal competitiveness in front of imported products.

And the value of remittances of Egyptians abroad, which declined during the last months of last year, remains due to their preference to deal with the black market, which is more expensive, and with the widespread brokers who deliver their value to their families in Egypt, without having to pay bank fees that depend on the extent of the stability of the exchange rate and the elimination of the black market until it returns to the official outlets, which is something. It takes several months.

In light of the need for a few months for worker remittances and export rates to return to normal, and the difficulty of issuing international bonds in light of the decline in confidence in them over the past year due to the decline in their market value or the return of hot money to buy Egyptian government debt instruments, whose returns rose to more than 18.7%.

Or the return of other forms of foreign direct investment other than the acquisition of stakes in large companies in light of the existence of a sovereign assessment of Egypt by the rating agencies "Fitch and Moody's" with a negative outlook, in addition to the degree of rating by the three American agencies by adding "Standard & Poor's" all Non-investment grade.

Therefore, the need for more external borrowing will continue to pay the installments and interests of medium and long-term loans during the new year amounting to 19.950 billion dollars, in addition to the installments and interests of short-term loans that are the most valuable, although most of them are usually renewed.

Thus, it is expected that the first half will witness further rises in inflation rates, interest rates, external debt, domestic debt, a decrease in the exchange rate of the pound against the dollar, the sale of shares of Egyptian companies, and the start of implementing the state ownership document that will allow the private sector to have a greater role, which are the factors that could contribute to creating a different ground. During the second half of the year, it is possible to expect the emergence of signs of improvement in some aspects of the Egyptian economy.