Egypt's economic outlook remains lacklustre

Daily News Egypt
3 Min Read

JOHANNESBURG: Egypt’s economic prospects remain fairly lacklustre as it approaches the end of its financial year but it will outperform its neighbors and most gulf Arab nations, a Reuters poll showed on Wednesday.

The survey of 14 economists predicted that gross domestic product (GDP) of the North African nation would have grown by 4.7 percent in the fiscal year that ends in 2 months time, ahead of other gulf nations, except region-leader Qatar.

"Over the short-term, Egypt’s impressive headline growth figures are masking a somewhat worrying decline in investment and private consumption," said Elizabeth Martins, head of Middle East and north Africa strategist at Business Monitor International.

Forecasters expect economic growth for Egypt to accelerate to 5.3 percent in the fiscal year 2011/12, below last month’s forecast by Economic Development Minister Osman Mohamed Osman for 6.5 percent.

"They were averaging around 7 percent annual growth (but) have slowed down as result of the global recession … the effects were mitigated by Egypt’s own stimulus package," said David Butter, Middle East director at Economic Intelligence Unit.

"The government has an ambition to put growth back on a very strong trajectory."

Egypt has approved LE 34 billion of stimulus since the global economic crisis hit, targeted mainly at infrastructure spending to boost the economy.

Butter also said there were still constraints due to high Egyptian inflation and weakness in the European Union economy, the country’s primary export destination. Egypt’s core annual inflation rose to 7.04 percent in the year to March from 6.9 percent in the year to February.

The poll forecast inflation would average 11.8 percent in the current financial year, before easing to 10.0 next year, and then dropping to 9.4 percent in the 2011/2012 financial year.

The Central Bank of Egypt held its benchmark overnight lending rate at 9.75 percent at its last meeting in March. The bank has held rates steady since cutting them in September.

Economists expect the central bank to again hold the overnight lending rate at its meeting on May 6 and by the end of financial year 2012 to have cut to 8.75 percent.

The Egyptian pound currently trading around LE 5.58 to the U.S. dollar, is predicted to be at LE 5.50 to the dollar by end-June then depreciate to LE 5.63 by end-June 2011 and sink further to LE 5.70 by the end of the financial year in 2012.

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