Central Bank of Egypt’s (CBE) Monetary Policy Committee (MPC) decided to keep the overnight deposit rate, overnight lending rate, and the rate of the main operation unchanged at 8.25%, 9.25%, and 8.75%, respectively.
The discount rate was also kept on hold at 8.75%.
In a press statement, MPC said that Egypt’s annual headline urban inflation accelerated for the third consecutive month to 5.7% in November 2020 from 4.5% in October 2020.
Meanwhile, annual core inflation increased only slightly to 4% in November 2020 from 3.9% in October 2020.
Moreover, Egypt’s real GDP growth recorded a preliminary 0.7% in the third quarter (Q3) of 2020, up from -1.7% during Q2.
According to the CBE Egyptian economy grew by 3.6% in fiscal year (FY) 2019/20 down from to 5.6% a year earlier due to coronavirus (COVID-19) pandemic.
However, most demand-side leading indicators for October and November 2020 show continued signs of recovery after displaying weakness in Q2. Furthermore, the unemployment rate recorded 7.3% Q3, the lowest rate on record, and down from 9.6% in Q2.
Globally, economic activity remains subdued despite the accommodative financial conditions, as the outbreak of the second wave of COVID-19 pandemic and its related lockdown measures weigh on the near-term outlook.
“On the other hand, the continued development and roll-out of vaccines could ease the level of uncertainty regarding economic activity over the medium term. Meanwhile, international oil prices started to slightly pick up recently,” the statement added.
CBE’s inflation target has been set at 7% (±2%) on average during Q4 2022, down from 9% (±3%) during Q4 2020, according to the statement.
“Egypt’s GDP growth is expected to recover albeit gradually, with structural measures expected to support economic activity. On the other hand, annual headline inflation rates are expected to be affected by unfavourable base effects related to the normalization of monthly inflation rates in 2021 but will continue hovering around the inflation target’s mid-point of 7% in 2022.”