Country Report Egypt April 2009

Summary

A slowdown in the domestic economy, which will disproportionately affect the poor, is likely to exacerbate social discontent, sparking sporadic outbursts of unrest over the next 12 months.
The government will continue to press ahead with its programme of economic reform, aimed at raising living standards and creating jobs.
In fiscal year 2008/09 (July-June) tax receipts will hold up, but the Economist Intelligence Unit expects the fiscal deficit to widen markedly in 2009/10 as the fiscal stimulus package is carried forward and tax revenue growth slows.
The Central Bank of Egypt has embarked on a loosening cycle. A 100-basis point cut in interest rates in early February was followed by a 50-basis point cut in March. We expect to see further reductions in 2009 and 2010.
We have made a small adjustment to our GDP growth forecast, owing to a worsening outlook for export growth as recession in the EU continues to deepen. We now expect GDP growth of 3.6% in 2008/09 and 3.7% in 2009/10.
The trade deficit will narrow in 2009-10, as falling commodity prices reduce the import bill. The current account will remain in deficit in both 2009 and 2010, but the deficit will be smaller in 2010.

In late March the Egyptian president, Hosni Mubarak, decided not to attend the annual Arab League summit in Doha, Qatar's capital, having boycotted another summit hosted by Qatar in January.
The "day of anger", a day of protests held on April 6th to mark the first anniversary of the April 2008 general strike, came to very little, mainly owing to massive preventive action by the Egyptian police and security forces.
On March 26th the Central Bank cut its key intervention rates, the overnight deposit and lending rates, by 50 basis points each to 10% and 12%, respectively, the second cut in interest rates since the beginning of the year.
Egypt's foreign-exchange reserves stood at US$32.2bn at end-March.
The World Bank has agreed to provide a loan of US$270m to support the Egypt National Railways Restructuring Project.
Egypts urban year-on-year inflation rate slowed to 12.1% in March, from 13.5% in February and 14.4% in January (from a peak of 23.7% in August 2008). Month-on-month inflation rose, however.
Egypt's three main sources of foreign-exchange earnings (tourism, the Suez Canal and workers remittances) have started to suffer from the impact of the downturn in global trade and economic activity.

Source: Country Report

This report covers the following industry codes:
SIC Code: 49;1;15
NAICS Code: 22;11;23