CAIRO: The economy emerged from last fiscal year, which ended June 30, by growing at a 20-year-high of 7.2 percent, Finance Minister Youssef Boutros-Ghali said on Sunday.
The figure leapfrogged some forecasts, as many analysts had openly worried that inflation would push growth below the 7 percent rate expected by the state. Growth had slowed steadily throughout the last year, marked at 8.1 in the last quarter of 2007, before slipping to 7.5 percent the next quarter and settling at 6.5 in the final quarter of the fiscal year, which runs from April through June.
According to Reham ElDesoki, senior economist at investment bank Beltone Financial, the results came as no shock. “The real GDP growth rate is in line with our forecast of 7.2 percent for fiscal year 2007/2008 based on strong growth in private consumption and investment, the bank wrote in a statement to investors.
Although the trade ministry has yet to release any details, a report issued by the investment bank EFG-Hermes suggested tourism was a major buoy for the economy, based on the 32 percent spike in that sector’s revenues announced by the Ministry of Tourism last week. Income from the Suez Canal and steady demand for Egyptian exports might have also accounted for some of last quarter’s growth, the bank said.
A Reuters poll taken in July showed 11 economists predicting that Egypt’s gross domestic product would grow between 4.8 and 6.8 percent in the fiscal year now underway. Many listed inflation’s potential to hinder private buying as one of the most harrowing threats the economy now faces – the national consumer price index hit 23.1 percent in July, its highest mark since 1992.
Economic growth could slow to 6.2 percent in the current fiscal year, as inflation will likely push Egyptians to buy less, EFG-Hermes predicted. Beltone analysts guessed the rate will slip below 7 percent, and will average 6.5 percent for the three year period until the 2009-2010 fiscal year.
However, “should inflation continue to accelerate and the pace of reform and its expansion to different sectors be delayed, then the momentum of growth could be compromised, the bank said.
A slowdown in Europe – which, taken as a whole, is Egypt’s largest trading partner – could also mean less cash from tourists and exports.
Efforts to keep the Egyptian pound down could counteract both of these effects. In July, nine out of 11 economists polled by Reuters predicted the pound will finish the year between 5.15 and 5.3 to the US dollar, in any case lower than its current rate of around 5.36.
