CAIRO: Egypt s economic growth rate for the third quarter of this fiscal year stood at 4.7 percent, according to a report released by the Ministry of Finance, a slight increase over the previous quarter.
Cairo-based investment bank Beltone Financial said in a statement that the growth exceeded our expectations and indicated that domestic demand was more resilient than we had previously expected, Magdy Sobhy, an economist at Al-Ahram Center for Political and Strategic Studies, called the figure surprising. Sobhy said he expected a low growth rate, so it is strange, because the third quarter was the peak of the crisis for Egypt. We had the lowest oil revenue, lowest traffic in the Suez [Canal] and lowest tourism figures. The figure, released on Saturday and reported by Reuters and the MENA news agency, contradicts earlier reports in a June bulletin from the Ministry of Finance and a cabinet report which indicated the rate was 4.3 percent.
It is unclear what the cause of this discrepancy is, but Sobhy explained that it is not uncommon for discrepancies in growth rates to exist.
He remarked that in 2004/05, there were a total of five different growth rates issued by the Ministries of Development, Finance, Trade and Investment.
Revenue from tourism, oil exports, the Suez Canal, remittances from abroad and mining are all down, but it seems Egypt has managed to avoid the worst of the global economic crisis. Sobhy pointed to a continually strong telecommunications sector as a leading factor.
MENA attributed Egypt s resilience to the telecom sector as well, in addition to mining. First quarter growth of 2008/09 was 5.8 percent and 4.1 percent in the second quarter. The average growth across the last fiscal year was 7.2 percent.
In the last few years, Egypt s annual growth has climbed to 6 and 7 percent.
Such figures were staggering and marked 20-year highs. According to an IMF report last year, much of Egypt s strong growth can be attributed to reforms in 2004. At that time Egypt introduced a foreign exchange market, reduced the weighted import tariff and made cuts to personal and corporate taxes. The government encouraged the privatization of banks. But the report also warned that Egypt s future growth depended in part on reforms to help the unemployed.
Statements made by the Minister of Finance Youssef Boutros-Ghali to Reuters in May indicated that Egypt would not suffer as much during the economic downturn as had been previously anticipated.
The minister said this realization reflects global trends. However, Boutros-Ghali expressed concern about rising poverty, noting that poverty rates have increased from around 15 percent to 18.55 percent since the start of the economic crisis. On July 1, the Economist updated Egypt s country brief, with new figures that show growth rates will rival pre-downturn figures starting in 2011. Until then, growth will sink to 4.0 percent in 2009 and 3.8 percent in 2010 before it rises again. Beltone Financial said it predicted Egypt s average annual growth for this year would even out at 4.5 percent.
Sobhy believes the fourth quarter will be better for Egypt, and if the US and Europe are going out of the recession, as expected, growth will be better and there will be more international trade and more traffic in the Suez.
But conditions must stabilize, Sobhy warned, and oil must settle at $65-70 a barrel for this to happen.