Egypt GDP growth seen edging up over next 2 years

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CAIRO: Egypt’s economic growth is seen edging up over the next two years as the most populous Arab country continues to outperform many other regional states, a Reuters poll showed on Wednesday.

A survey of 11 economists predicted gross domestic product (GDP) in the North African country would grow 5.2 percent in the fiscal year ending in June 2011, based on the median figure, and 9 economists forecast it would grow 5.3 percent the year after.

That is faster than the predicted rates for all the Gulf Arab states except Qatar, but still below the annual rates of more than 7 percent that Egypt had posted before the outbreak of the global financial crisis.

"For the economy to really accelerate beyond the 5.8 to 6 percent level, we really need to see a stronger economy in Europe, which most probably will not happen," Mohamed Abu Basha, an analyst at investment bank EFG-Hermes, said.

Economists have said 6 percent plus is needed to create enough jobs for its growing workforce and to dent poverty.

Egypt’s economy has benefited from more than five years of tariff cuts, the sale of state companies, the liberalization of investment regulations and other reforms. The financial crisis nevertheless hit Suez Canal revenue and foreign investment.

Growth fell to 4.7 percent last year, and a previous poll forecast the economy would grow at a similar rate in the year ending this month.

Economic Development Minister Osman Mohamed Osman said in May that GDP could grow as much as 5.3 percent this year and 6 percent in the year ending June 2011.


Tourism, accounting for about 11 percent of GDP, has proven fairly resilient, with revenue down just 2.1 percent in 2009.

Egypt has also approved about LE 34 billion of stimulus spending in three stages since the global economic crisis hit, targeted mainly at infrastructure spending.

"The fiscal stimulus packages had an effect, especially the first one worth 15 billion Egyptian pounds," said Reham ElDesoki, senior economist at investment bank Beltone Financial.

The poll also predicted inflation would reach 10.9 percent next fiscal year and fall to 8.5 percent the year after that.

Accordingly, analysts expected the central bank to cut the overnight lending rate to 9 percent next fiscal year and snip it to 8.5 percent the year after. The rate is now 9.75 percent.

The Egyptian pound is seen strengthening to LE 5.50 to the US dollar next year, compared to LE 5.68 to the dollar now. It is seen weakening again to LE 5.58 the year after that, the poll showed.

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By Reuters
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