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Egypt's Central Bank Leaves Key Interest Rates Unchanged

A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
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Egypt's Central Bank Leaves Key Interest Rates Unchanged

A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh
A general view of Dahab Island or Gold Island (Gezirit el-Dahab) in the middle of the Nile River in Cairo, Egypt, July 2, 2024. REUTERS/Amr Abdallah Dalsh

Egypt's central bank left its overnight interest rates unchanged on Thursday, as expected, saying economic growth remained slow but that inflation has been decreasing.
The bank's Monetary Policy Committee (MPC) left the deposit rate at 27.25% and the lending rate at 28.25%.
All but one of 18 analysts in a Reuters poll had expected rates to remain unchanged, with the sole analyst forecasting a cut of 100 basis points (bps).
The decision keeps the overnight deposit rate below that of headline inflation, which was 27.5% in June. Real interest rates have been negative since January 2022. Inflation declined in June for a fourth straight month after soaring to a record 38% in September.
The MPC expects inflation to come down sharply in the first half of 2025.
"The gradual unwinding of food inflation along with the improvement of inflation expectations suggest that inflation is on a sustained downward trajectory," the MPC said.
Gross domestic product inched down to an annualized 2.2% in the first quarter from 2.3% in the final quarter of 2023, the MPC added.
"Leading indicators for Q2 2024 suggest that economic activity remains subdued. Consequently, real GDP growth is expected to slow down in FY 2023/24 compared to the previous fiscal year, before recovering in FY 2024/25," it said.
Egypt reported GDP of 3.8% in 2022/23.
The central bank raised interest rates by 600 bps on March 6 as part of an agreement with the IMF, bringing total increases since the beginning of the year to 800 bps. Egypt also sharply devalued its currency against the dollar under its IMF accord.

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Non-Oil Activities Drive Saudi Economic Diversification Efforts

A view of containers at Jeddah Islamic Port on the western coast of Saudi Arabia (Saudi Ports Authority)
A view of containers at Jeddah Islamic Port on the western coast of Saudi Arabia (Saudi Ports Authority)
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Non-Oil Activities Drive Saudi Economic Diversification Efforts

A view of containers at Jeddah Islamic Port on the western coast of Saudi Arabia (Saudi Ports Authority)
A view of containers at Jeddah Islamic Port on the western coast of Saudi Arabia (Saudi Ports Authority)

Non-oil activities are playing an increasingly pivotal role in diversifying Saudi Arabia’s economy, currently contributing 51% to the total real GDP, with expectations to reach 65% by the decade’s end.

This shift aligns with the country's efforts to rely on varied income sources across multiple sectors and enhance human capital development in line with Vision 2030.

Saudi Arabia leads in cleaner hydrocarbon energy production and is a frontrunner in renewable energy sectors such as green hydrogen, solar, wind, and others. Notably, it is establishing the world’s largest green hydrogen production facility with a total investment of $8.4 billion.

Faisal Al-Ibrahim, Saudi Minister of Economy and Planning, highlighted the sustained strong growth of non-oil activities since the inception of Vision 2030, constituting 51% of the real GDP, surpassing the oil sector's contribution.

He emphasized the Kingdom’s achievements and prioritized accelerating economic diversification and enhancing human capital development.

“We are now on the brink of a new economic era that will witness transformative changes in the coming decades,” affirmed Al-Ibrahim.

Experts speaking to Asharq Al-Awsat anticipate non-oil sector participation to rise to approximately 65% by 2030, driven significantly by private sector contributions. They noted significant economic evolution towards income sources beyond oil, such as investments in coastal infrastructure projects.

Dr. Abdullah Al-Jassar, member of the Saudi Energy Economics Association, believes the current 51% contribution of the non-oil sector will increase to about 65% by the decade’s end, bolstered by substantial private sector involvement.

He highlighted Saudi Arabia’s notable economic shift towards relying on non-oil activities as a primary source of growth, propelled by key factors including ambitious Vision 2030 programs aimed at economic diversification and reducing oil dependency.

Massive government investments in infrastructure and developmental projects in non-oil sectors like tourism, particularly between 2015 and 2020, exceeding billions of riyals, significantly accelerated economic diversification and renewable energy sector development.

Al-Jassar pointed out that “tourism leads the forefront of key sectors currently relied upon by the non-oil economy,” growing at an average annual rate of 10%, contributing 10.4% to the GDP according to the Q1 2024 Statistics Authority report.

This also includes sectors like mining, manufacturing, and agriculture.

He expects expanding promising sectors such as biotechnology, artificial intelligence, digital economy, and developing logistics services infrastructure to be crucial for export operations, advancing non-oil activity growth.

Al-Jassar assumes non-oil activities will continue to accelerate in the coming years, given the clear roadmap for diversifying the non-oil economy, alongside emerging opportunities attracting more investments to fund their activities. This will enhance Saudi Arabia's resilience against future economic challenges triggered by oil price fluctuations.

Financial advisor Ahmed Al-Jubeir emphasized Saudi Arabia’s long-term strategy for non-oil economic growth, aiming to enhance society, tackle inflation, and strengthen economic, financial, and monetary policies under Vision 2030.

He noted that this strategy would diversify revenue sources without relying on oil, ensuring the sustained evolution and prosperity of the Saudi economy.

This includes investing in citizens, improving their income by providing employment opportunities for all, solving unemployment and housing issues, and increasing women's participation in the workforce to support human resources.