Societe Generale forecasts additional 10% devaluation of EGP by end-March

EGYPT CURRENCIES

Societe Generale Group said that Egypt is likely to devalue the Egyptian pound again in the near future, and it could end the current quarter by 10% below its current levels, Bloomberg reported on February 24th.

Emerging markets strategists at Societe Generale Phoenix Kalen and Gergely Ürmössy explained in a report that the debt-distressed North African nation will need a cheaper currency given its large current account deficit and dollar shortage.

Despite three devaluations that made the pound 50% weaker over the past year, the currency has not reached its “new short-term equilibrium,” the strategists said.

“The lack of decisively hawkish action by the central bank of Egypt raises questions around the credibility of its commitment to deliver in accordance with its inflation-targeting mandate,” the strategists wrote. “Real interest rates remain negative both on a backward- and forward-looking basis.”