Egypt election considered unlikely to threaten FDI

Political risks surrounding Egypt’s ongoing presidential election are fairly low, according to analysts, which is a positive sign for foreign investors. The elections run between March 26 to March 28, with the final results due on April 2.

FDI into Egypt hit its highest levels since 2009 in 2016 and 2017, according to greenfield investment monitor fDi Markets, meaning interest in the election is likely to be high among investors. FDI inflows remained healthy following Egypt’s previous elections in mid-2014, in which Abdel Fattah el Sisi took 97% of the vote with 48% turnout.  

"The expectation is for [another] overwhelming victory for Mr Sisi. The only surprise this time has been that the rivals who emerged from the military establishment were ruled out. The army continues to occupy prime political position. Its role was strengthened in the last constitution. [Therefore], we can expect zero impact on policy from this election,” said Hasnain Malik, global head of equity research at developing markets investment bank Exotix Capital.

Emma Whiteacre, country analyst at political risk insurer Beazley, contended that the elections will be “net positive for the [FDI] climate. Mr Sisi is very much a product of the Mubarak era and absolutely prioritises stability.” She added that there is little appetite for a renewed revolution and the the benefits of economic reforms are starting to be felt in Egypt, with unemployment and inflation coming down to 11.3% and 14.4%, respectively.

“Although there are deep-rooted social issues that remain unaddressed, Mr Sisi can legitimately claim credit for the restoration of economic stability; the implementation of the reform agenda (including the floating of the pound, the reduction in fuel subsidies and the elimination of capital controls), underpinned by the $12bn IMF agreement of late 2016, which is serving to restore external creditworthiness. Foreign exchange reserves have been rebuilt and now stand at $37bn, sufficient to cover almost eight months of imports, which is driving improved domestic and foreign investor confidence and should ensure that we continue to see rising levels of inward FDI,”, said Ms Whiteacre.

Egypt is up by 10% on the MSCI stock market index and 15% on the EGX30 index, driven by the collapse in core inflation (now below 12%, compared with a peak of 35% in mid-2017), the first policy rate cut since 2015, and the issuance of $4bn of Eurobonds, which was three times oversubscribed.