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00:00As you look at the ongoing commodity price surge and with the move by the Central Bank of Egypt how much time does that by the country really for the remainder of the year. I think key here is what are going to be the dynamics and inflation and what are going to be the inflationary pressures on commodities going forward from here. Obviously a lot of wheat imports a lot of oil imports limited commodity exports. And quite frankly given what's happening with the conflate given the uncertainty about supply diversification in Europe and the potential move away from Russian oil for example I don't see these pressures going anywhere anytime soon. And they're going to continue to be a source of pressure on Egypt. And they could only intensify from here especially given for example on the oil side as we start to see demand for oil rising as we see increased economic activity globally. We're beginning to see further scope for upside to oil prices from here. Energy is going to be a huge amount of pressure on the country moving forward from here. So while it does buy some time those pressures are not going to be resolved by these moves. And as a result we think that it only buys a limited amount of time. How much of this how important is it that they strike a deal with the IMF sooner rather than later. Our economists believe that is of paramount importance obviously to give them a better footing in the international capital flow markets to give them the credibility as well and the support of the IMF. Obviously it goes a long way to giving some comfort to international investors. And I think even though over time they have to diversify their sources of funding. The reality is for the near term they will remain reliant on international fund flows. And I think that having an IMF deal will give some degree of comfort there. So it's it's it's arguably very important to get back to what you were saying about energy prices and also talk about how the Saudis are likely to benefit massively versus of course you know countries like Egypt are having to sort of find ways to make ends meet as it were a potential surplus. Have you revisited the numbers because of the higher energy prices. We're looking at Brent there 120 dollars this morning. So we recently as a house moved our oil price forecast to one hundred ten dollars Brent for this year. On average there are obviously some upside risks depending on what are going to be the dislocations in the energy market. And arguably those pressures are intensifying now. Given the lack of certainty around whether the flow of energy from Russia will continue unabated into Europe and into international markets there's discussion of three million barrels of Russian oil coming out of the market. While we could argue that the UAE and Saudi and some of the other larger oil producers will eventually have the ability to meet that demand these are long term investments. This is not something that will be reserved resolved in the short term. So there will be upside pressure to oil prices from here. Should the conflict be prolonged and sanctions be in place for an extended period of time. And then that sort of scenario of course. You know I think the market is going to have to continuously look at revising their forecasts for surpluses just to flesh out the the impact on sort of the fiscal side and the economic momentum. So sited in Saudi. So if we take that as a ten dollar a barrel mark would each extra ten dollars on the price. What do we get in terms of GDP boost. So it really depends on how they start to recycle that money into the economy. And I think this is the more this is the bigger question is what does Saudi do at this juncture with this windfall that they're making and the opportunity to take market share in global oil. Should they continue on the path that they've already laid out with Vision 2030. We think that's very positive. Could there be some pullback against the fiscal tightening that we've seen over the last few years maybe on the V.A. side. There could be some movement but the reality is that Saudi is now on a course to really diversify the economy. This windfall will buy them further time and arguably gives a lot more momentum and credibility to the reform process in the country which we're very excited about. And already we've started to see some real movements there. For example in the investment programs from the PBF from the government from the Shery Ahn program you're looking at multi trillion dollars worth of investment potential there. And we think there's still significant opportunity in the Saudi market which is only supported further by what we're seeing with. The movements in commodity prices mean the other thing that caught my attention in terms of the house calls was on the Turkish lira which you think actually will offer a level of resilience despite higher inflation and higher interest rates out of the United States higher energy prices. I mean that's usually a toxic mix for Turkey isn't it. Yes absolutely. But I think it's a relative game here that we're talking. And certainly you know we think that the pressures that we've seen can abate somewhat despite the sort of backdrop that we're looking at right now. And that could be beneficial to some of the investments in the region particularly as we start to see more flows of capital for example from the UAE into Turkey. There's a big investment trade going on there right now and there's an increasing amount of exposure from GCC countries into Turkish investments. So you know we think that certainly this could be an opportune time for those investments which once upon a time people would question them with this sort of backdrop that we expect. This could be very interesting.

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Egypt's Surprise Hike

Hootan Yazhari, Head of MENA & Global Frontier Markets Equity Research at Bank of America Securities discusses Egypt's surprise rate hike and its impact on the Egyptian pound, economy and stock market. He also gives his investment outlook for the MENA region. He speaks with Yousef Gamal El-Din on "Bloomberg Daybreak: Middle East." (Source: Bloomberg)

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