Egypt keeps interest rates steady as GDP growth slows

Reuters/Amr Abdallah Dalsh

Egypt’s central bank kept its overnight interest rates steady as economic growth in the north African country slowed in the second quarter of 2023.

The central bank’s monetary policy committee (MPC) maintained the deposit rate stable at 19.25 percent and the lending rate at 20.25 percent, the apex bank said in a statement.

The median forecast of a Reuters poll of 14 analysts forecast that the MPC will hold rates, although six analysts expected a hike of between 100 and 300 basis points.

Real gross domestic product (GDP) growth slowed to 2.9 percent in Q2 2023 from 3.9 percent in Q1 2023, implying growth of 3.8 percent for fiscal year 2022/23.

The marked slowdown is primarily due to a contraction in gross domestic investments, while net exports and consumption were the main drivers of growth in economic activity, the statement added.

Real GDP growth is expected to slow down further during fiscal year 2023/24 but will pick up gradually thereafter. Unemployment remained broadly stable at 7.1 percent in the third quarter.

Headline inflation fell to 34.6 percent in November 2023, down from 35.8 percent in October. In addition, annual core inflation continued to decelerate for the fifth consecutive month, recording 35.9 percent in November, down from 38.1 percent in October.

“The MPC decided that current policy rates remain appropriate at this juncture,” the central bank said, but will continue assessing the impact of previously enacted tightening policies on the economy.