Country Report Egypt July 2009

Outlook for 2009-10

• A slowdown in the domestic economy, which will disproportionately affect the poor, and growing dissatisfaction with the government will exacerbate social discontent, sparking sporadic outbursts of unrest in the forecast period.
• The government will nonetheless continue to press on with its programme of economic reform, aimed at raising living standards and creating jobs.
• The Economist Intelligence Unit expects tax receipts to decline and the fiscal deficit to widen in fiscal year 2009/10 (July-June) as the government's fiscal policy remains strongly expansionary.
• The Central Bank of Egypt (CBE) has embarked on a loosening cycle, with four interest rate cuts so far this year. We expect to see one or two further reductions in 2009 and 2010.
• We have made an upward revision to our forecast for real GDP growth following better than expected recent economic data. We now forecast GDP growth of 4.4% in 2008/09 and 4% 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, with the deficit averaging 1.9% of GDP.

Monthly review

• Rumours that Egypt's president, Hosni Mubarak, will step down as president have been circulating around Cairo, but the ruling party has moved swiftly to quell speculation, stating that no new candidate will be selected until 2011.
• The government has continued its ongoing crackdown on the Muslim Brotherhood, Egypt's largest opposition group, arresting 150 members of the group in recent months.
• A new financial services regulator was launched on July 1st, to regulate all non-banking financial services. The General Authority for Financial Supervision remains under the tutelage of the Ministry of Investment.
• The Egyptian cabinet's Information and Decision Support Centre has announced that the cost of gas subsidies will be reduced in fiscal year 2009/10 to E??1.5bn (US$268m) from ??E??6.5bn in 2008/09, a drop of 77%.
• The Suez Canal Authority (SCA) reported a 28.6% year-on-year decline in receipts to US$342.4m in May, and a 26.1% fall to US$348.2m in June. The decline is far worse than the government's forecast of a 3.5% drop.
• Official figures have shown that tourism revenue fell by 17.3% year on year, to US$2.2bn, in the third quarter (January-March) of 2008/09.
• Inward FDI totalled US$5.2bn in the first three quarters of 2008/09.

Source: Country Report

This report covers the following industry codes:
SIC Code: 37;47;70;48
NAICS Code: 336;48;72;517