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Investing.com -- Egypt faces economic vulnerability due to its exposure to oil prices, but could receive support from Gulf states during the summer, according to Bank of America. The bank estimates that a $10 per barrel increase in oil prices would expand Egypt’s current account deficit by $1.0 billion, equivalent to 0.3% of GDP, while increasing its fiscal deficit by 0.1% of GDP on a net basis.
The external financing situation for Egypt remains tight, with delays in the International Monetary Fund’s fifth review of the country’s program. BofA analysts note that while Egypt’s currency could weaken with capital outflows, real interest rates are likely to remain high.
Oil price spikes could benefit oil exporters in the Gulf region, assuming no disruptions to supply flows, according to the bank’s analysis. Saudi Aramco (TADAWUL:2222)’s oil stocks held outside the Middle East could help smooth the impact of any short-lived disruption.
BofA expects the Group of Eight within the Organization of Petroleum Exporting Countries (OPEC) to maintain focus on market management and the planned return of approximately 0.8 million barrels per day in production over July and August meetings. The bank suggests Russian opposition to further OPEC supply increases may grow nonetheless.
The regional tensions may also impact Lebanon, with BofA indicating the challenging regional backdrop could mean Lebanon’s economic reform program and donor support may face temporary delays as Hezbollah and its allies handle other priorities.
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