Country Report Egypt June 2009

Outlook for 2009-10

• 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 (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 data for January-March. We now expect GDP growth of 4% in 2008/09 and 3.8% 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 1.6% of GDP.

Monthly review

• The recent visit of the US president, Barack Obama, to Cairo was a clear indication of improved Egyptian-US relations since the election of Mr Obama.
• In late May cases of the pandemic H1N1 virus were reported in Egypt for the first time.
• New legislation has been passed to increase the number of female members of Egypt's lower house of parliament, the People's Assembly.
• The Central Bank of Egypt has cut its two intervention rates, the overnight deposit and lending rate, by 50 basis points each, with effect from June 21st, taking the rates to 9% and 10.5%, respectively.
• Parliament has approved the final budget for 2009/10. The budget contains measures to raise public-sector salaries by 10% and reduce energy subsidies.
• A new eight-year bond for E??4.65bn (US$830m) was issued in early June. The bond is backed by the Ministry of Finance and was fully subscribed.
• Real GDP growth rose by 4.3% year on year in the third quarter of 2008/09 (January-March), up from 4.1% in the previous quarter.
• The rate of inflation fell to 10.2% year on year in May, from 11.8% in April.
• The balance of payments posted a deficit in the first nine months of 2008/09.

This report covers the following industry codes:
SIC Code: 60
NAICS Code: 52