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CBE to resume its monetary easing cycle in 4Q2019: Fitch Solutions – Daily News Egypt

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The Central Bank of Egypt (CBE) will resume its monetary easing cycle in the fourth quarter (Q4) of 2019,  Fitch Solutions expected over its “Africa Monitor: North Africa” report released on Thursday evening, adding, “we expect the CBE to enact 200 basis points worth of cuts in 2020 as fiscal consolidation eases and the International Monetary Fund (IMF)-backed reform programme comes to an end.”

Overnight lending and deposit rates will reach 13.75% and 12.75%, respectively, by the end of 2020, the report said, noting, “despite Egypt’s commitment to completing its IMF-stipulated reform programme with the fourth round of subsidy cuts in mid-2019, we believe a subdued outlook for commodity prices will cap inflationary pressures over the coming quarter.”

A couple of economic experts agreed with Fitch Solutions’ expectations regarding the importance interest rates cuts in 2019, noting that the remaining period of the year should witness new cuts to encourage investment flows and decrease the costs of finance.

Fitch Solutions’ commodities team expects the price of wheat – a proxy for food prices – to fall below the 2018 average this year while FS’ oil & gas team forecasts a mere 1.8% increase in average global Brent crude prices in 2019.

US Federal Reserve’s decision impact on Egypt’s interest rates

The US Federal Reserve’s decision to take on a more neutral stance will provide the CBE with additional room to resume monetary easing without prompting large capital outflows, Fitch Solutions added.

The Egyptian pound has appreciated by 4.1% against the USD in the year to date despite a rate cut by the CBE in February, said the report, adding, “we believe this will prompt the CBE to cut the overnight deposit and lending rates in 4Q2019 to 14.75% and 15.75%, respectively.”

The expected interest rate cuts will positively reflect on easing the government debts burden, Sherine El-Shawarbi, economic expert and former advisor to the World Bank Group in Egypt, told Daily News Egypt, adding that the inflation indicator is in down trend which encourage the authorities to cut the interest rates.

“We expect the disinflationary trend to carry over to 2020 as fiscal consolidation eases and the IMF loan programme comes to an end. Base effects will likely wear off, particularly towards the second half (H2) 2020, keeping headline inflation firmly within the CBE’s target of 9.0% (±3.0%) by 4Q2020,” Fitch Solutions mentioned.

CBE will be keen to support non-hydrocarbon private investment which has been hampered by

monetary tightening throughout the IMF programme, the report added, noting that this will bode well for job creation and, more broadly, the country’s growth trajectory.

The pace of monetary easing will be gradual in a bid to maintain relatively attractive real interest rates vis-à-vis safe haven assets and to prevent large capital outflows, the report explained, noting, “this is especially pertinent given that the repatriation mechanism – an exchange rate guarantee for portfolio investors that draws on a dedicated foreign reserves fund at the CBE – has been scrapped for inflows dated after December 2018. As such, we forecast 200 basis points worth of cuts to the policy rate in 2020.”

Egypt’s fiscal deficit will continue to narrow

The interest rate cuts will positively reflect on narrowing the budget deficit in line with the expected increase in tax revenues, El-Shawarbi noted.

Egypt’s fiscal deficit will continue to narrow over the coming fiscal year, according to the report, expecting the budget shortfall for the current fiscal year to come in at 8.5% of GDP.

Egypt’s fiscal deficit to narrow to 6.9% of GDP in the fiscal year (FY) 2019/20, from 8.2% in FY 2018/19, the report noted, adding that the savings will account for the bulk of the gains, with the government round of subsidy cuts in mid-2019.

Strong revenue growth, driven by rapid economic growth, improved tax collection and privatisation proceeds, will also provide support to further fiscal consolidation, the report asserted, noting that interest rate cuts by the CBE will also ease the repayment burden of the government’s large short-term debt load while the primary balance will remain positive.

Strong revenue growth will also help slim deficits down. The Egyptian economy continues to grow apace and we forecast real GDP growth to come in at 5.4% in FY 2019/20, slightly above the 5.3% recorded in the last fiscal year, according to the report.

Together with measures to increase tax collection, such as requiring businesses to report some of their taxes online, tax revenues should continue to grow at a healthy clip in FY 2019/20, the report said.

Interest rate cuts by the Central Bank of Egypt (CBE) will ease the government’s debt servicing burden. Egypt’s government debt remains high, standing at 89.5% of GDP at the end of FY 2017/18, while most of the government’s debt (50.6%) has a maturity of or below a year, said the report.

This makes debt servicing costs exceedingly high, with interest payments consuming over half of Egypt’s tax revenues.  That said, short-term local currency borrowing costs have dropped substantially since the start of the year thanks the US Federal Reserve’s more neutral language since December and rate cuts by the CBE in February.

Egyptian pound’s position to remain strong

The Egyptian pound is likely to slowly depreciate from 2020 onwards as real rates once again become less attractive vis-à-vis the US. We believe the CBE will resume its monetary easing cycle in 4Q2019 and maintain it over the next several years as inflation decelerates and macroeconomic stability improves, reducing the attractiveness of the EGP, according to the report.

Fitch Solutions expected the pound’s long-term depreciation to be gradual, forecasting it to finish at

EGP 17.30/USD in 2020, just 1.8% lower than its end-2019 forecast.

Economic expert Youmn El-Hamakki told Daily News Egypt that the position of the EGP will remain strong over the next period due to improving the foreign currency resources such as exports, Egyptian expats remittances, Suez Canal fees of transportation as well as FDIs.

Trade tensions continue to pose a danger to global growth, with the US Trump administration once again hardening its rhetoric against both China and the EU after months of relative calm, the report said.

Increased punitive measures could spark another bout of risk-off sentiment, which would hit emerging markets especially hard. We expect this would trigger some degree of capital flight from Egypt (especially of volatile short-term debt instruments) and exert downside pressure on the pound, likely pushing the CBE to lend support to the unit in a bid to stave off imported price pressures, the report mentioned.

The Egyptian market remains attractive comparing to other similar markets if the CBE cuts interest rates and the US Federal Reserve took on a more neutral stance, El-Hamakki asserted.

Challenging economic outlook for Algeria, Tunisia, and Morocco

Fitch Solutions report revised down Algeria’s 2020 growth figure, to 2.0% from 2.3% which reflects its belief that the risks of widespread social unrest will persist over the medium term, continuing to deter investment.

“Indeed, although our core view remains for moderate concessions by the ruling elite to eventually help quell the current wave of unrest, we still believe social discontent with the limited democratic representation in the country will continue to simmer, meaning protests could easily remerge further down the line,” the report mentioned.

The ongoing instability will likely see planned reforms to improve Algeria’s foreign investment regulations delayed, further weighing on investor appetite, said the report, noting that these factors add to an already challenging economic outlook for the country, with growth set to slide even further behind global emerging market averages over the next few years.

Additionally, Tunisia’s real GDP growth will stay weak compared to the region in the near term, said the report, noting, “we currently forecast growth of 2.4% in 2019 and 2.3% in 2020, from 2.5% in 2018. This represents one of the weakest rates in North Africa, just above Algeria.”

In different note, Fitch Solutions believes the dispute over the status of the Western Sahara region will remain unresolved for the foreseeable future, the report said, noting that UN-mediated talks in December 2018 and March 2019  have failed to resolve the decades-long dispute over the status of Western Sahara, with the Moroccan government firmly rejecting Algeria-backed Polisario’s demand to hold a referendum on independence from the Kingdom, offering autonomy instead which both Algeria and Polisario continue to oppose.

The dispute will continue to obstruct Morocco’s relations with Algeria and will likely impede the Kingdom’s ambitions in the broader Sub-Saharan Africa region, the report mentioned.

Egypt

Photo shoot of Colleen Darnell pays tribute to Zelda Fitzgerald – Daily News Egypt

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                            <p class="p1"><span class="s1">As time goes on, out lifestyle pace gets faster while modern clothes and technology prevail; yet, it freezes for Egyptologist Colleen Darnell as she decided to stay still in vintage serenity of early 20</span><span class="s3"><sup>th</sup></span><span class="s1"> century. The passion of the epoch queen was recently captured by the lens of the photographer Menna Hossam, to bring the world a photo shoot reviving the authenticity charm of the last century. </span></p>

“Ode to Zelda” is the second photo session Darnell has this year in Egypt. The US Fashion aficionada is known for her passion of dressing in vintage clothes of 1920s to 1940s, which captivates number of photographs to document her beauty and unique style.

The well-known fine art and fashion photographer shares Darnell the same vintage passion as classics own her heart out of the belief, they hold a magical secret. Driven by the history frenzy, Hossam reached out to Darnell to have her second photo shoot in Egypt.

The Yale graduate, is currently teaching Egyptian art history at Naugatuck Valley Community College. She has spotlighted a number of Egyptian discoveries in her researches, and published a number of papers about Ancient Egypt’s various eras.

“I’m all about vintage style, and Darnell is all about vintage! Her looks are extremely unique, and she provokes any photographer into capturing her photo,” Hossam told Daily News Egypt.

Inspired by the first American Flapper, Hossam dedicated her session to the veteran American novelist, Zelda Fitzgerald.

Unlike the expected plot of an Egyptologist photo shoot taken by an Egyptian photographer, the project was not captured by the Pyramids, nor at any of the Ancient Egyptian historical spots.

“I thought it wold be so expected and repetitive to have the regular photo session over viewing the Sphinx or the Pyramids behind her. Away from the hassle it would take to have the permits, I mainly wanted to focus on her style, look, and photogenic face,” Hossam explained.

For one and a half months, Hossam has been preparing for the project, intensively looking for an appropriate location, before her eyes laid on a downtown apartment owned by Dakhli West El Balad, a specialised locations platform.

“It was too old, yet magical!” she enthusiastically said.

According to Hossam, from the moment she stepped inside the timeworn apartment, she visualised the whole shoot in her mind. “I already knew about the two outfits, she would wear, and with the old timeworn décor, and the fading colours, I made my mind up into choosing this location,” she added.

Hossam added that Darnell gave the ultimate happiness any photographer can ever have while capturing a celebrity, which is “trust.”

“She gave me the full trust to direct her into whatever I want, which gives any photographer the ultimate happiness,” she concluded.

   

All photos taken by Menna Hossam

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                Nada Deyaa’
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            Culture reporter, passionate reader and writer, Animals lover and Arts follower.


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Researchers monitor CO2 leakage sites on ocean floor – Daily News Egypt

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                            <p class="p1"><span class="s1">Injecting carbon dioxide (CO</span><span class="s2"><sup>2</sup></span><span class="s1">) deep below the seabed can be an important strategy for easing climate change, according to experts in the field. However, scientists need a reliable way to monitor such sites for leakage of the greenhouse gas. </span></p>

Now, researchers reporting in ACS journal Environmental Science & Technology have studied natural sources of CO2 release off the coast of Italy, using what they learned to develop models that could be applied to future storage sites.

The multinational energy company Equinor operates a CO2 capture and storage facility that injects about 1 megaton per year of the greenhouse gas into an offshore sandstone aquifer deep below Norwegian waters. Undersea storage of the gas presents less risk for humans in case of accidental leakage compared with storage on land because the vast ocean acts as a buffer for the released CO2.

However, the leaked gas can dissolve in ocean water, decreasing the pH and potentially harming the local marine ecosystem. Currently, scientists lack an established method to identify and quantify multiple CO2 leaks spread across a region of the ocean floor. Therefore, Jonas Gros and colleagues investigated pH changes near natural CO2 seeps in the vicinity of Panarea, a small island off the coast of northern Sicily.

The researchers used scuba divers and ship-based instrument deployments to collect gas and water samples from undersea CO2 plumes. The team used these data to validate a computer model that they developed to predict pH changes to water resulting from leakage of the gas. This simulation indicated that over 79% of the CO2 dissolved within 4 metres of the seafloor.

The team found that the model could predict a pattern of pH variation in waters surrounding the leakage site that was similar to actual data collected by sensors towed underwater. The new model could be used to guide sampling strategies during routine monitoring of storage sites and to estimate impacts of CO2 releases to the local marine environment.

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New study links neuropsychiatric disorders to pollution – Daily News Egypt

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                            <p class="p1"><span class="s1">Researchers are increasingly studying the effects of environmental insults on psychiatric and neurological conditions, motivated by emerging evidence from environmental events like the record-breaking smog that has choked New Delhi two years ago. </span></p>

In a new study published recently in the PLOS Biology journal, an international group of researchers from the US and Denmark used large data sets to suggest a possible link between exposure to environmental pollution and an increase in the prevalence of psychiatric disorders.

The team found that poor air quality was associated with higher rates of bipolar disorder and major depression in both US and Danish populations. The trend appeared even stronger in Denmark, where exposure to polluted air during the first ten years of a person’s life also predicted a more than two-fold increase in schizophrenia and personality disorders.

Computational biologist Atif Khan, the study’s first author, said the study shows that living in polluted areas, especially early in life, is predictive of mental disorders in both the US and Denmark. He added that “the physical environment – in particular air quality – warrants more research to better understand how our environment is contributing to neurological and psychiatric disorders.”

Although mental illnesses like schizophrenia develop due to a complex interplay of genetic predispositions and life experiences or exposures, genetics alone do not account entirely for variations in mental health and disease. Researchers have long suspected that genetic, neurochemical, and environmental factors interact at different levels to affect the onset, severity, and progression of these illnesses.

Growing evidence is beginning to provide insight into how components of air pollution can be toxic to the brain. Recent studies on rodents suggest that environmental agents like ambient small particulate matter (fine dust) travel to the brain through the nose and lungs, while animals exposed to pollution have also shown signs of cognitive impairment and depression-like behavioural symptoms. 

Andrey Rzhetsky, the lead author of the new study, said, “We hypothesised that pollutants might affect our brains through neuroinflammatory pathways that have also been shown to cause depression-like signs in animal studies.”

To quantify air pollution exposure among individuals in the US, the University of Chicago team relied on the US Environmental Protection Agency’s measurements of 87 air quality measurements. For individuals in Denmark, they used a national pollution register that tracked a smaller number of pollutants with much higher spatial resolution.

The researchers then examined two population data sets, the first being a US health insurance claims database that included 11 years of claims for 151 million individuals. The second dataset consisted of all 1.4 million individuals born in Denmark from 1979 through 2002 who were alive and residing in Denmark at their tenth birthday. 

Because Danes are assigned unique identification numbers that can link information from various national registries, the researchers were able to estimate exposure to air pollution at the individual level during the first 10 years of their life. In the US study, exposure measurements were limited to the county level. “We strived to provide validation of association results in independent large datasets,” said Rzhetsky.

Rzhetsky also cautioned that the significant associations between air pollution and psychiatric disorders discovered in the study do not necessarily mean causation, and said that further research is needed to assess whether any neuroinflammatory impacts of air pollution share common pathways with other stress-induced conditions.

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Aswan High Dam ready for new flood in 2019/20 water year: Irrigation Ministry – Daily News Egypt

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                            <p class="p1"><span class="s1">Minister of Water Resources and Irrigation, Mohamed Abdel-Aty, led a meeting of the Permanent Regulatory Committee of the Nile Flow and the ministry’s executive bodies on Tuesday to discuss preparations for the flood season. </span></p>

A report by the committee stressed that the Aswan High Dam is ready to receive the new flood of 2019/20 water year. The water year begins in August as the water levels start to rise due to a flood from the Abyssinian plateau, passing through Khartoum before reaching the Nasser Lake. 

Egypt took all necessary measures and completed maintenance works of the dam in preparation for the flood, the ministry’s spokesperson Mohamed Sebaei said.

 

During the meeting, Eman El Sayed, head of the ministry’s planning sector, said the flood forecasting centre has been following rain forecast maps of the Nile River’s headwaters since the beginning of August. She added that the rainfall situation on the Blue Nile Basin is still around the average so far.

Ahmed Bahaa, head of the ministry’s Nile sector, said rains on northern Sudan is not an indicator of the river flow, noting that the current flows are still less than those of the same period last year, and it is too early to predict the volume of the new flood and it is better to wait until the end of September for a more clear vision.

Egypt is depending on the annual Nile flow (55.5bn cubic meters) to secure about 97% of its present water needs with only 660 cubic metres per capita, one of the world’s lowest annual per capita water shares. Meanwhile, Ethiopia continues constructing its Grand Renaissance Dam, which is believed to threaten Egypt’s water security.

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“Phantom of the Opera” normalises violence in society – Daily News Egypt

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                            <p class="p2"><span class="s1">Violence is the biggest threat to peace and security in today’s world. According to statistics, each year, over 1.6 million people worldwide lose their lives to violence. </span></p>

Almost every day we read hundreds of reports of violence triggered by ethnic, religious or cultural hatred all over the world. It was dreadful to hear about the recent massacre at Walmart in Texas, in which the shooter targeted Mexicans only and let both whites and African Americans live.  Most seriously, we started to discuss the prevalence of violence perpetrated by police officers against unarmed people in established democracies such as France, Spain and Italy. Earlier in August, a local man lost his life in the western French city of Nantes following a violent clash between police and people attending a music festival. These horrific events indicate only one truth that people today, in all cultures and countries, use violence to get their arguments and points across.                      

  

Marwa El- Shinawy

Certainly, violence is not intrinsic to human nature as much as it is a man-made phenomenon. In many ways, violence has been normalised through the pop culture we consume. Arts and drama are among the most effective ways that create a cultural acceptance of violence, promoting a social tolerance of violent behaviour in society. Dramatized violence has been a feature of entertainment throughout history. The realistic portrayal of violence is considered as one of the distinguishing marks of great artists like for example Edward Bond, who legitimised the depiction of violence in drama on the pretext of presenting a realistic image of society. In many dramatic works of high artistic value and massive popularity, brutality appears to be justified, and terrorist acts go unpunished. The history of drama is replete with works that propagate violence that it has become normal for us to see it as a means of gaining power and authority.

   The world’s most famous musical The Phantom of the Opera, which celebrates this year its 31st anniversary on Broadway, and its 33 record-breaking years at the Majestic Theatre in London, is a living example of the great classics that romanticize violence and spread it in society.   

Based on the novel written by Gaston Leroux in 1910, The Phantom of the Opera musical has become one of the world’s most commercially successful theatrical productions that the BBC characterized it as the “most successful entertainment venture of all time.”

The show has travelled the world and entertained millions of people. Most importantly, the play is incredibly popular with both school and college groups. However, The Phantom of the Opera is the story of a disfigured, angry man who lives beneath a Paris opera house and terrorises its cast and crew so that his beloved, Christine, can have a chance to sing the lead part. The play represents gratuitous violence in a romantic mode. The lover- phantom is nothing but a cold-blooded assassin, who does not hesitate to harm other people to assert his authority. The narrative of the play is driven by violence and the desire to dominate over others.      

    Doubtless, this critique does not underestimate this great, timeless play with its high-octane music composed by Andrew Lloyd Webber in his most inspired mode and the brilliant dramatic staging of Harold Prince, who passed away a few weeks ago. Nevertheless, it is necessary to condemn violence in drama, especially the widespread classical works that normalize and romanticize violence and we study them in schools and colleges. In light of the current political and cultural climate, banning violence in the drama is no less important than criminalizing it in constitutions and laws. Violence in media, dramatic arts, and popular culture should be moved onto the public health agenda as the prevention of violence have become the subject of urgent social debate.

Marwa El- Shinawy holds a PhD in American theatre, and is a member of the Higher Committee for the Cairo International Festival for Contemporary and Experimental Theatre

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