Country Report Egypt March 2009

Outlook for 2009-10

• A slowdown in the domestic economy is likely to exacerbate social discontent (which was 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 jobs.
• In fiscal year 2008/09 (July-June) tax receipts will hold up, but the Economist Intelligence Unit maintains its forecast that the fiscal deficit will widen, as public spending on social services rises as the economy slows.
• The Central Bank of Egypt has embarked on a loosening cycle. Following a 100-basis point cut in interest rates in early February, we expect to see several cuts in 2009 and in 2010, probably of around 200-300 basis points in total.
• 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 3.8% in 2008/09 and 3.9% 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 deficits will be smaller than in 2008.

Monthly review

• A wave of public protests has swept across Egypt recently. Organisations of pharmacists, lawyers, teachers, doctors, factory workers, truck drivers, students and journalists have all protested against the government's policies.
• The US government passed its annual spending package in March, which included US$1.5bn of aid to Egypt, comprising a US$1.3bn military grant and US$200m in economic assistance.
• Figures from the Ministry of Finance for the first seven months of 2008/09 (July-January) reveal that the government remains broadly on track to meet its full-year budget targets.
• A new property tax law was expected to come into force on January 1st 2009, but in late February the finance minister, Youssef Boutros-Ghali, announced that the tax will come into effect from January 2010.
• According to data from the Central Bank, Egypt's 39 banks are weathering the global credit crunch well, as a result of a significant tightening of regulation and a concomitant process of banking consolidation over the past four years.
• The balance of payments recorded a deficit in the second half of 2008 (July-December). The capital and financial account surplus narrowed from US$3.1bn to US$2bn, and the current account moved into deficit.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;37;53;49;60;2834;80;47;70
NAICS Code: 517;336;44;22;52;3254;62;48;72