Video|12 December 2024

MENA | What’s Driving Change in Syria and Egypt?

Ending over five decades of rule, the Assad regime in Syria collapsed as opposition forces took control of the capital Damascus and major regions, creating political uncertainty. While the official Syrian pound rate remains pegged to the U.S. dollar, the parallel exchange rate has risen significantly by 22% between the end of November and December 5. We expect this exchange rate to further increase as political instability continues.

Egypt’s inflation has reached a two-year low, falling to 25.5% in November from 26.5% in October. We anticipate further declines in the first quarter of 2025, dropping below 20% y/y level. Containing inflation is a central objective of Egypt’s $8 billion economic reform program with the IMF. However, the reduction of subsidies as part of these reforms has arguably contributed to recent inflationary pressures, despite their long-term goal of fiscal stabilization. We expect these structural reforms to support a further decline in inflation, reaching 16.2% y/y by end of 2025.5.

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