Country Risk Service Egypt January 2013 Updater

Country Risk Service Egypt January 2013 Updater

Overview

Political uncertainty has deepened following a controversial move by the president, Mohammed Morsi, to grant his decisions immunity from judicial review. A parliamentary election is scheduled to be held following the approval of a new constitution in a referendum. We expect the Muslim Brotherhood to again perform well. However, the opposition has been strengthened by a low turnout and close result in the first round of the referendum on the constitution and is likely to improve on its previous electoral performance. Economic growth will pick up but remain slow at 2.9% in 2012/13 owing to ongoing political uncertainty. The Economist Intelligence Unit expects growth to average 5.9% in 2012/13-2016/17.

Key changes from last month

Political outlook

The first round of voting in a referendum on the constitution took place on December 15th with the second round to follow on December 22nd. Initial results showed that 56.5% of voters were in favour of the constitution, but turnout was just 31%.

Economic policy outlook

The president, Mr Morsi, announced and then suspended a law providing for a spate of tax increases in early December, stating that the austerity measures must first be explained to the public. The government followed the move by asking the IMF to delay a decision on a US$4.8bn stand-by credit facility.

Economic forecast

We have revised our estimate of the current account deficit for 2012 to 2% of GDP (previously 3.2%) based on new data for the third quarter of the year.

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