Egypt has registered a quite steady growth dynamics in Q1, as unemployment went down to 8.1% from 10.6% a year ago. Growth was +5.6% y/y in Q1 but, as subsidies are progressively cut and inflation is still quite high (+14% y/y in June), private consumption is no longer the main contributor. Investment is likely to have grown at a strong pace during fiscal year (FY, July to June) 2018/19 (+13% YTD). Import substitution is the other key growth contributor since net trade is currently improving mainly as a result of decreasing imports (-6.7% YTD in FY 2018/19). Overall, Egypt should be able to live without IMF support, since the government does not want to ask for new financing after the end of the current program (November 2019). The import cover of foreign reserves is still quite high (about 9 months) and the country has recently benefited from falling yields (the 10-year local currency yield was 16% in June, -200bps below the February level). We expect growth to accelerate to +5.7% during the next fiscal year.
