Country Report Egypt December 2008

Outlook for 2009-10

• A slowdown in the domestic economy will exacerbate social discontent (which has been fuelled by high prices for staple goods during 2008), 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 employment.
• A new fiscal stimulus package to boost economic growth is likely to lead to a severe deterioration of the public finances in fiscal year 2008/09. The Economist Intelligence Unit now forecasts a deficit of 7.8% of GDP in 2008/09.
• We believe that the Central Bank of Egypt has reached the end of its tightening cycle. We expect it to leave interest rates on hold until early 2009, with the possibility of several cuts in 2009 and in 2010.
• We have made a downward adjustment to our GDP growth forecast, owing to a deteriorating outlook for export growth as the EU moves into recession. We now expect GDP growth of 5.1% in 2008/09 and 4.9% in 2009/10.
• The trade deficit will narrow in 2009-10 compared with 2008, as falling commodity prices reduce the import bill. The current-account surplus is therefore expected to widen over the outlook period.

Monthly review

• The annual conference of Egypt's ruling National Democratic Party (NDP) in early November focused on economic issues under the slogan "A new style of thinking for the future of our country".
• On November 30th the finance minister, Youssef Boutros-Ghali, announced a fiscal package aimed at boosting economic growth. The package includes E12bn (US$2.18bn) in increased government spending.
• The Egyptian government has announced its intention to proceed with a major overhaul of the social insurance system in the near term in order to preserve social security for future generations.
• In mid-November the NDP announced plans under which all Egyptians above the age of 21 would receive a certificate of ownership of shares in a range of state-owned companies.
• Real GDP growth slowed to 5.8% year on year in July-September (the first quarter of 2008/09), down from 6.6% in April-June and 6.9% in July-September of 2007/08.
• The prices of building materials have fallen sharply in recent months. The ex-factory price of Egyptian steel fell from a record high of around E7,650(US$1,390)pertonne in August to E3,800 per tonne in November.

This report covers the following industry codes:
SIC Code: 47
NAICS Code: 48