São Paulo – After going through a sharp depreciation in the last two months of 2016, the Egyptian pound could be one of the currencies to appreciate the most against the US dollar in 2017. The estimate was made by the chief economist of The Economist Intelligence Unit (EIU), Simon Baptist. The EIU is the research and analysis division of The Economist Group, the British group that publishes the namesake weekly magazine.<\/p>\n
In a newsletter sent this Thursday (5), Baptist estimates that only 12 of the 60 major currencies in the world will appreciate against the US dollar this year, and their main bet is on the Egyptian pound. “Our most bullish call is for the Egyptian pound. We think that the markets have overshot after the welcome float of late 2016 and expect a 14% appreciation this year,” said the economist in the newsletter. <\/p>\n
On November 3, 2016, Egypt’s Central Bank liberalized the foreign exchange system and let the pound float freely, one of the measures taken to reduce the shortage of dollars in the country. The dollar was worth EGP 8.88 on November 2 in the official exchange rate and the price started to climb sharply the next day, reaching the peak of EGP 19.67 on December 20. This Thursday, the North American currency was priced at EGP 18.21, that is, still more than double the value of before the depreciation.<\/p>\n
The variation in the foreign exchange rate, however, produced positive results quickly in the country’s external accounts. According to an article published this week by EIU, remittances to Egypt by nationals living abroad totaled USD 1.7 billion in November, against USD 1.3 billion in October, an increase of near a third from one month to another. Before, says the article, remittances had been continuously dropping since the start of 2015. <\/p>\n
According to EIU, in Q3 of last year, before the depreciation, remittances had totaled USD 3.4 billion, the lowest amount for a quarter in many years.<\/p>\n
In addition to this, spending by Egyptians abroad started to exceed spending by foreigners in Egypt early in 2016. In the first nine months of last year, Egyptians spent USD 3.5 billion abroad, against USD 2.5 billion in the same period of 2015, according to the EIU. Foreigners, in turn, spent USD 1.8 billion in the country from January to September of 2016, against USD 5.1 billion in the first nine months of the previous year. <\/p>\n
Tourism is one of the country’s main sources of revenues, but the sector has been slowing down since the Arab Spring, in 2011, and more sharply since 2015, when a Russian passenger plane crashed in the Sinai under the suspicion of a terrorist attack. The decline in the sector’s revenues affected significantly Egyptian external accounts. According to the EIU, the current account deficit reached USD 14.7 billion in Q1 2016 against USD 11.8 billion in the same period of 2015.<\/p>\n
Estimates<\/strong><\/p>\n The article, however, says that data from the Q4 2016 should come up with more positive results due to the increase in remittances by expats, the improvement of investments flow after the float of the exchange rate and the loans signed by the country with the International Monetary Fund (IMF) and the World Bank. The agreement with the Fund is worth up to USD 12 billion. The IBRD approved in December loans worth USD 1 billion to the Arab country.<\/p>\n The EIU expects the country’s current account deficit to drop to USD 13.8 billion in 2017, against an expected USD 16.4 billion in 2016. Besides the increase in remittances by expats, the EIU believes that the foreign exchange rate will discourage imports and encourage exports. <\/p>\n *Translated by Sérgio Kakitani<\/strong><\/p>\n