Charts of the Week

As have many other emerging economies since March 2018, Egypt’s economy has weathered significant capital outflows. Holdings of Treasury Bills by foreign investors have dropped by almost USD 10 bn since March to reach USD 11.7 bn at end-October 2018. As a consequence, the Central Bank of Egypt Tier 2 FX reserves (prudential reserves that are not included in official reserves and match the carry-trade capital flows) and commercial banks’ foreign assets have declined.

In parallel, the central bank’s official FX reserves have remained almost stable. They currently amount to USD 44.5 bn, the equivalent of 7.1 months of imports of goods and services. Despite the deterioration in the external position, liquidity in foreign currency is not at risk, notably given the expected further decline in the current account deficit.

The adoption of IFRS 9 accounting standard on 1st January 2018 significantly changes the impairment model for bank assets. Expected credit losses (and not only incurred losses) are now recognised using a more prospective approach than previously required.

IFRS 9 introduces an intermediary category for performing assets whose credit risk has nonetheless increased significantly since their initial recognition, even though no credit event has occurred. Such “phase 2” led banks to recognise additional provisions for impairment whereas the quality of their portfolios remained unchanged.

The decline in common equity tier 1 attributable to IFRS 9 should not be interpreted as a decline in banks’ loss absorbing capacity. Some of the prior “unexpected losses”, previously covered by regulatory capital, are now covered by accounting provisions replacing the former.


The COP24 (Conference of the Parties) will take place from 3 to 14 December in the Polish city of Katowice. Aim of the meeting is to make progress on the implantation of the Paris climate deal. CO2 emissions have to be cut by about 20% by 2030 from 2010 levels and reach net zero around 2075 in order to limit global warming below 2°C over pre-industrial times. Yet, they are still trending higher.

Certainly, they have somewhat declined since 2000 in the OECD, as production has become less CO2 intensive. By contrast, emissions are growing rapidly in the developing world because of industrialisation and the catching up process. In the BRIICS - Brazil, Russia, India, Indonesia, China and South Africa, CO2 emissions per capita have almost doubled since 2000. 

Limiting or, a fortiori, reversing this trend requires much efforts and cooperation. The advanced economies should help the developing countries in climate adaptation and mitigation policies. They have already agreed to jointly mobilise USD 100 billion per year by 2020.

ABOUT US Three teams of economists (OECD countries research, emerging economies and country risk, banking economics) make up BNP Paribas Economic Research Department.
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