Country Report Egypt November 2008

Summary

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 demonstrations and 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 generous wage package for civil servants and increased food subsidies could lead to a worsening of the public finances in fiscal year 2008/09, especially if the economy slows by more than the government forecasts.
The Economist Intelligence Unit believes 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 small adjustment to our GDP growth forecast, owing to our expectation of falling investment and export growth, as the global economy slows. We now expect GDP growth of 5.6% in 2008/09 and 5.1% in 2009/10.
The trade deficit will be smaller in 2009-10 than in 2008, as slowing domestic demand puts a damper on imports, and is expected to be comfortably offset by a surplus on the invisibles account, leaving the current account in surplus.

A meeting in Cairo between the two main Palestinian factions, Fatah and Hamas, as well as 11 other smaller groups, scheduled for November 9th was postponed indefinitely after Hamas pulled out.
The US Congress has approved US$1.5bn in US military and civilian grants for Egypt for 2009. Part of the grant has been made conditional on Egypt improving its human rights record and security co-operation with Israel.
The government has made concerted efforts to reassure Egyptians that the effects of the global financial crisis on the domestic economy will be limited.
On October 1st a new system of "economic courts" began operation. The courts have been set up over the past three years to allow economic disputes to bypass the slow and sometimes inefficient judicial system.
Panic hit the Egyptian stockmarket in October, pushing the index of the leading 30 shares, the CASE 30, below the 5,000 mark, down from 10,550 at end-2007, a 55% drop over ten months.
Prospects for future gas production were boosted in October by a significant gas and condensate discovery by Dana Gas.
Suez Canal receipts reached US$1.46bn in July-September 2008.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;47
NAICS Code: 52;48