CAIRO: The Egyptian economy grew at an annualized rate of 7.5 percent in the first quarter of 2008, compared to 7.4 percent in the same period last year and 8.1 percent in the last quarter of 2007, the Cabinet said in a press statement.
The Cabinet said the current rate of growth in gross domestic product (GDP) was above government’s expectations. They previously expected the economy to grow at 7.1 percent during the current financial year.
According to Beltone Financial, Egypt’s economy is set for dynamics of healthy growth, which would continue to grow at healthy levels in the medium term.
Angus Blair, head of research at Beltone Financial, said that Egypt would shrug off the current slowdown in global economy. “Egypt continues to be a major beneficiary because of the government, which has done an amazing job.. The main thing to do is to make sure that economic growth continues to be as strong as possible. When you have that strong economic growth, you have investment, and then people spend. By spending you create the market-buyer effect, which people see it all through the society.
“They [the government] have already created it and will continue to create the right conditions for economic growth to help people all the way.
The Cabinet stated that the fastest growing sectors were tourism at 23-27 percent, Suez Canal revenue at 19 percent, construction at 15-15.5 percent and communications at 13-15 percent.
Recent data shows that Suez Canal revenues grew to $1.2 billion in the first quarter of this year, up from $1 billion in the first quarter of 2007, due to rising numbers of vessels passing through.
Growth in construction sector has mainly been fueled by Egypt’s promising real estate market. Total investments in Egypt’s real estate market have soared to $52 billion in some 16 mega projects. According to Prime Minister Ahmed Nazif, the value of built up real estate as of last February stood at LE 200 billion ($37.5 billion).
According to the Cabinet, Egypt’s nominal growth rate (GDP at current market prices) escalated to LE 226.5 billion in the quarter, compared with LE 180.8 billion in the same 2007 quarter. The figure comes way above government’s forecasts of a nominal GDP worth LE 150 billion.
The current rate achieves an average annual GDP of 12,226 per capita.
On the other hand, Egypt’s high economic growth rate has triggered high inflation, which hit a three-year high of 16.4 percent in the year to April. Analysts expect inflation to shoot to 20 percent within a few months when the government’s latest hikes in prices of gasoline, cigarettes, and energy for intensive industries reflect on the consumer price index.
“The downside is that Egypt is importing inflation on top of this economic growth due to inefficient agricultural reform, Blair said. “There has to be agricultural reform within Egypt to be able to have greater food production and [thus reduce food imports]. That should be a major priority.
Lack of mass public transport in Cairo is another concern that could slow economic growth. “Cairo is a mega city and lack of mass public transport will act as a bottleneck to its growth quite quickly. You have to look to trams and light railways because they are very quick to install. They have to be introduced very quickly across the whole of greater Cairo, from Heliopolis all the way to Sixth of October, he added.
“There’s a lot of attention to development of ports, airports, major roads, and railways between cities. But for Cairo, we ignore it in many ways and that would act as a major constraint to growth.because it slows people around.