Country Report Egypt May 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 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 downward revision 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 3.4% in 2008/09 and 3.1% 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 just under 1% of GDP.

Monthly review

• Tensions have erupted in Egypt after the government announced that all pigs in the country would have to be culled, in a misguided attempt to appear proactive in preventing the viral swine flu infection reaching the country.
• Some 49 men were arrested in April for allegedly belonging to Hizbullah. There was speculation that the men had in fact been arrested for trying to smuggle goods across the border into the Gaza Strip.
• The 2009/10 draft budget has been presented to parliament for approval. The budget projects a decrease in tax receipts of almost 19% compared with 2008/09. The deficit is projected to reach as much as 8.4-8.5% of GDP.
• The global recession has started to affect the Gulf Arab states, where many Egyptians work. Egypt is faced with the prospect of having to accommodate a large number of expatriate workers returning home.
• The Ministry of Trade and Industry has launched a probe into possible collusion in the fixing of cement prices, the second investigation in one year.
• The Egyptian Exchange performed strongly in April, rising by 23.8% month on month, on the back of renewed optimism in global stockmarkets.
• Data from the central bank show that FDI has been severely reduced by the global downturn. Inward FDI fell by 49.2% year on year in the fourth quarter.

Source: Country Report

This report covers the following industry codes:
SIC Code: 48;70;15;49;60;10
NAICS Code: 517;72;23;22;52;212