Arab Finance: Egypt's real gross domestic product (GDP) growth decelerated to 2.4%in the first nine months of fiscal year (FY) 2023/2024, down from 4.1% in the same period a FY earlier, data from the Central Bank of Egypt (CBE) showed.

This slowdown was affected by the rising geopolitical tensions and persistent inflationary pressures.

The CBE cites challenges on the global front, including heightened geopolitical tensions and persistent inflation and interest rates.

As of the end of the previous FY 2023/2024, the banking sector's assets constituted 116.9% of nominal GDP and 92.3% of the total financial system's assets.

Data highlights the sector's ongoing role in facilitating foreign currency transactions and financing international trade while adhering to the economic reform program supported by the International Monetary Fund (IMF).

The implementation of a flexible exchange rate system and an improved economic outlook have led to increased foreign investment and a surplus in the balance of payments from January to March 2024.

Additionally, there has been a rise in the banking sector's net foreign assets and liquidity ratios in foreign currency, strengthening the net international reserves to cover short-term external debt.

The report notes that fiscal policy is focused on enhancing financial control measures, while monetary policy has adopted a restrictive stance to combat inflation, with interest rates raised accordingly.

The mandatory reserve ratio for local currency remains at 18%, and the maximum percentage of total loan installments for consumer purposes is set at 50% of monthly income.

The non-banking financial sector accounted for 9.8% of nominal GDP and 7.7% of total financial system assets in the previous FY.

The sector demonstrated significant growth and the Egyptian financial market performed well through the first quarter (Q1) of 2024.

The Financial Regulatory Authority (FRA) is expected to adopt more flexible measures to enhance the efficiency and stability of financial markets, as per the data.

The financial stability index rose to 0.44 in March 2024, up from 0.34 in March 2023, reflecting improvements in the banking sector's performance and macroeconomic indicators.