Egyptian Banks driving economic rise-A Report by Moody

According to the first rating agency-Moody, “North Africa’s largest economy Egypt has constantly been improvising its economy thanks to the strengthening Banking sector, its tough reforms, and lending operating conditions.”

The recent report by Moody on Egyptian Banks stated that the

•    Banking reforms in the region are continually improving and due to a stabilized deposit-based funding, vast volumes of liquid reserves in the form of local currency (Egyptian Pound), as well as strong and stable economic profitability improving the credit profile as well as driving the buoyant economy.

•    Due to the increased public, private partnership (PPP), investment has risen, and also there is marked improvement in the number of Private-public partnership firms.

•    It has also seen a significant surge in higher exports as well as a rise in the tourism sector.

•    The most populous Arab country forecasts its Real GDP growth to reach 5.5 percent in 2019 and by 2020 to be at 5.8 percent. It is driven by a surge in foreign direct investment, a rise in overall country exports and a rise in tourism.

•    The best report for the country came as expected from countries premier exporting sectors like Petrochemicals, Fertilizers, and Textiles that surged ahead in 2018 as it rose to a new high of 19 percent to touch $25.8 billion (DH94.7 bn). Tourism sector also saw a surge and reached 48 percent mark to touch 9.8 million in 2018.

•    Moody also reported that Egypt’s economic condition is also bolstered by the fact that non-performing loans (NPL) within the banking system has remained stable by dropping to just 4.4 percent than 19.3 percent that in 2007. However, they admitted that it cannot be taken on a lighter note and is quite a weak force that can cause a deep crisis within the economy as there are a large volume of untrusted newer loans as well as security risks associated with it.

They, however, affirmed that this crisis would soon end as the rise in credit demand and deepened financial inclusion in the region will be well aided by Government schemes promoting to shift base to cashless digital economy (Mobile payment based transactional) system from a cash-based operating system. As well central bank to up the reserves and surplus has introduced initiatives like promoting small and medium units being exempted from direct-indirect loans, establish tax-free zones, Mortgage lending with fewer rates of interest, etc.
Although the Egyptian Banks creditworthiness to the sovereign’s reported a 50 percent hike from 16 percent to 32 percent of government based assets and securities thus having good liquidity, the dwindling foreign asset reserves and global financial tightening (recession) is still a significant cause of concern for regions overall economic development.