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Investing.com - The Egyptian pound will face increasing downward pressure in the coming months due to a deteriorating balance of payments situation, according to a recent analysis by BCA Research.
The research firm points to a sharply widening current account deficit and dwindling capital inflows as the primary factors behind the expected currency weakness. This depreciation pressure will likely result in higher domestic bond yields across the Egyptian market.
Egypt’s disinflation phase has concluded, BCA notes, with strong credit growth and robust fiscal spending fueling a private consumption boom that will intensify price pressures throughout the economy.
The analysis highlights structural economic weaknesses, including contracting capital spending and stalled productivity gains, which have lowered Egypt’s potential growth rate and made the economy more susceptible to overheating.
While there may be temporary improvements in Egypt’s public debt-to-GDP ratio, BCA warns that the long-term outlook remains concerning, as low potential growth rates combined with high real borrowing costs will eventually cause public debt relative to GDP to surge.
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