CAIRO: “Egypt plans to double exports in the next four years from LE 92 billion to LE 200 billion, Prime Minister Ahmed Nazif said at the Seventh Business Roundtable with the Egyptian government organized by the Economist.
Nazif also said that there will be more PPPs and opportunities for the private sector to invest in infrastructure.
The goal, he said, is to open up new opportunities in infrastructure and investment. At 7 percent growth, he explained, one of the barriers to more growth is infrastructure: transportation, energy and other resources needed for industry.
“The challenge and the goal for Egypt is to keep growing at 7+ percent, Nazif said.
Nazif said there is more commitment from the government to stay the course of reform, but warned that society will resist change unless they see proof that it works.
He added that the government provided the proof, gained a lot of credibility but “we [the government] need to market reform better.
“We have to make sure that the side effects of transformation don’t take over. For example energy requirements grow as the economy grows. We also have to tune the labor force to requirements of the job market.
Jane Kinninmont, editor for the Economist Intelligence Unit, said that Egypt’s fiscal deficit is expected to reach 9.6 percent of Egypt’s GDP for the current fiscal year.
The growing deficit is a consequence of the recent stimulus packages that the government aimed at supporting the economic development of Egypt during the recession.
“Our impression is that the [stimulus packages] have been quite well targeted because they do focus on infrastructure, said Kinninmont. She explained that one of the main concerns of the business community raised during the roundtable discussions has been inadequate infrastructure and difficulties in transporting goods.
Jumping from 6 percent last year, the deficit will be expensive to finance, she said. It is driving interest rates up, which is precluding domestic financing of small and medium enterprises and their development.
Nazif said that “the goal to bring the deficit down to 3 percent of GDP by 2012 will have to be postponed for a couple of years.
He added that core inflation is around 6 percent, so “we’re not worried about inflation.
Ongoing governmental investment in infrastructural projects is expected to drive growth in the long run. Currently, Egypt is in second place in the Middle East in GDP growth after Qatar. The Economist Group’s estimate for growth in the current fiscal year is 5.5 percent and for the next one – 5.4 percent. The long-term growth numbers are expected to reach 6-7 percent, especially if infrastructure problems are resolved, said Kinninmont.
While the present speed of economic development is well above the global, recently estimated at 2-2.5 percent, it is not enough to cope with Egypt’s unemployment rates, according to the Economist Group.
“The risk that comes out of the demographics and the high rate of unemployment can come over into some kind of social unrest, like we saw with the football riots for instance, said Kinninmont. She identified unemployment of young people as one of the three major political concerns of the business community with interests in Egypt.
Another concern is the process of political succession that will unroll around the upcoming presidential elections. The Economist Group expects that because of the sensitivity of the issue, the government would avoid bold fiscal policy reforms in taxation and subsidies to avoid tension.
The third political issue that has come to focus recently is the growing instability of the relationship between the West and Iran. Any escalation in the current situation is expected to have ramification for the Middle East as a whole.
Another obstacle to businesses in Egypt is the slow judicial system, a recurrent problem across the whole Middle East, said Kinninmont. She also recognized unavailability of credit as a substantial barrier to business growth in Egypt.
“More of an issue is the fact that there are no export markets. The employers of expatriates, the sources of tourism are European markets and those markets are in difficulty and are growing slowly, said Kinninmont, pointing out the effect of the global financial crisis on Egypt.
Asked to comment on the general attitudes of analysts of identifying the country as a ‘winner’ in the current global economy, she said, “[Egypt] hasn’t really gained as a result of the crisis. It was just not affected as badly.
Nazif commented that while the past year was the peak of the crisis, Egypt was doing well and the economy was resilient and responded well to the crisis.
“After the crisis we should look further . the country’s economy has built enough power to absorb shocks, he said.
The labor force, he said, remained intact because there were no layoffs but it was still a problem because “we have to provide for the newcomers in the market. He explained that unemployment increased because the number of jobs needed were not created, but not because of layoffs.
The local market, he added, did well because there was no consumer hesitation, consumption is still growing, construction growth is in double digits and housing is still growing.
Nazif also said that tourism numbers in January are similar to 2007 and 2008 numbers.
The prime minister also responded to questions about presidential elections, saying this government has been implementing a presidential campaign program with specific target for reform. “It’s a good time to meet goals if the National Democratic Party hopes to get good marks in the next election, he said, “Right now we are preparing a program for the following term.