Egypt's economic growth may accelerate this fiscal year helped by consumer spending, though it will probably remain below what the government says is needed to keep unemployment from rising, said Bloomberg
An economist at Cairo-based investment bank CI Capital Alia Mamdouh said that “Egypt has sizeable demand which is not expected to slow down”
Mamdouh added that “Government spending will also help growth because I don’t see private investment picking up that much,” forecasting a growth rate of 5.8 percent.
The economy of the most populous Arab country expanded at an average rate of 7 percent in the three fiscal years through June 2008, helped by foreign investment and revenue from tourism and the Suez Canal. Growth slowed to 4.7 percent in the year ending June 2009 due to the global financial crisis.
The government says it needs a growth rate of about 7 percent to create enough jobs for the 750,000 people who enter the workforce every year. Unemployment is 9 percent, according to the state statistics agency.
“The rapid output growth that we saw between 2005 and 2008, underpinned by foreign direct investment productivity gains and the favorable external environment will be a challenge to reproduce” this year, said John Sfakianakis, Riyadh-based chief Middle East and North Africa economist at Credit Agricole CIB. He is forecasting a growth rate of 5 percent.
Foreign Investment
Egypt is targeting about $8 billion in foreign direct investments next year, compared with a forecast of $5.5 billion this year, according to a report published on the Economic Development Ministry’s website. Foreign investment peaked at more than $13 billion in the year through June 2008.
Private investments have remained below their pre-crisis levels, the ministry said in the report. They fell to 48 percent of total investments in the year through June 2009, from 64 percent in the previous 12-month period, it said.
The economy expanded 5.8 percent in the third quarter of the fiscal year that ended on June 30, from 5 percent in the previous three months, Economic Development Ministry Osman Mohamed Osman said in May.
The state’s growth target could be achieved “if the performance of the manufacturing sector continues to improve, in addition to the services sectors, including retail trade, transportation, construction and the Suez Canal,” Reham El- Desoki, senior economist at Cairo-based investment bank Beltone Financial, said in an e-mail. She is expecting growth to reach 5.4 percent in the next fiscal year.
Egypt’s benchmark EGX30 stock index has fallen 5 percent this year compared with an 8 percent decline of the MSCI Emerging Markets Index. Orascom Construction Industries, Egypt’s biggest publicly traded builder, has fallen 11 percent this year.
