Country Report Egypt October 2009

Summary

The regime will begin to prepare the ground for the parliamentary election in 2010, but there will be outbursts of social unrest as the poor suffer from aftermath of the economic downturn in 2008/09.
Mindful of its need to deliver on social services and benefits, the government will press on with its programme of economic reform, aimed at raising living standards and creating jobs.
The Economist Intelligence Unit expects the government's fiscal policy to remain strongly expansionary in fiscal year 2009/10 (July-June), despite falling tax receipts. The will lead to a widening of the budget deficit to 8.1% of GDP.
The Central Bank of Egypt has embarked on a loosening cycle, having cut interest rate six times so far this year as inflation has slowed. We expect to see one more reduction in late 2009 or early 2010.
We have made upward revisions to our forecasts for real GDP growth in 2009/10 and 2010/11. We now expect growth of 4.8% in 2009/10 and 5.7% in 2010/11.
The trade deficit will widen in 2010-11, as domestic demand continues to suck in imports and export growth remains sluggish. The current-account deficit will narrow in 2010-11, averaging 0.9% of GDP over the two years.

Hopes of an Egyptian-mediated reconciliation between the main Palestinian factions have been dashed because of a dispute over how to respond to a report on Israel's invasion of the Gaza Strip, which criticised Israeli actions.
Farouq Hosny, the Egyptian culture minister, has failed in his controversial bid to become the next director-general of UNESCO, despite having been the initial favourite. He blamed the US and "Zionist pressure".
Egypt has signed a 15-year deal with Lebanon to supply 600m cu metres/year of gas through the Arab Gas Pipeline, via Syria. However, Egypt's gas export commitments are being questioned as domestic demand continues to rise.
New official estimates put oil and gas reserves at an all-time high, of 4.4bn barrels and 77.2trn cu ft respectively. Gas production averaged 6bn cu ft/day and crude oil production 530,000 barrels/day in 2008/09.
Tourism data present a mixed picture, but the overall 7.3% decline in revenue for the first eight months is not as steep as might have been expected given the poor economic conditions in tourism source countries.
Suez Canal receipts were down by 24% year on year in the first eight months of 2009, and inward FDI fell by 18% from its 2007 peak in 2008.

This report covers the following industry codes:
SIC Code: 70;49;80;1;47
NAICS Code: 72;22;62;11;48