CAIRO: Egypt’s economy can grow as much as 5.5 percent during fiscal year 2009/10, Investment Minsiter Mahmoud Mohieldin said Tuesday.
During his keynote address at the Euromoney Egypt Conference 2009, Mohieldin also said that Egypt is aiming to bring inflation down to between 6 to 8 percent.
The Euromoney Egypt Conference opened with an announcement from Managing Director Richard Ensor that Finance Minister Youssef Boutros-Ghali would be unable to deliver the first keynote address due to flu – not H1N1.
Mohieldin gave the second keynote speech, enduring questions from Enson and the audience.
Although Mohieldin playfully questioned the appropriateness of one of the conference panels, titled “Rejoice! It’s not as bad as we thought, he remained optimistic, citing Egypt’s positive growth rate of 4.7 percent and the diversity of the sectors driving growth.
The economy grew by 4.7 percent in 2008/09, above analysts expectations, and according to Mohieldin it could grow as much as 5.5 percent or even more under some scenarios.
He lauded the “8.4 percent inflation rate, down from a high of 23 percent in August 2008 and the decrease in unemployment from 11 to 9 percent in the past five years.
While maintaining a glass-half-full joviality, he did cite several areas in need of attention if Egypt’s promising GDP growth is to translate into real improvements in quality of life for Egyptians. Infrastructure development, tax collection, and particularly, the ease with which entrepreneurs can launch and run small and medium enterprises (SMEs), which constitute 90 percent of businesses in Egypt.
Preemptively addressing these concerns, he cited the decrease in tax rates from 40 to 20 percent, the new small business stock exchange NileX, and the advancement in Egypt’s rank in the ease of launching a business, from 126th to 24th place, according to the International Finance Corporation.
He also cited the budgeted LE 10 billion for infrastructure developments in 2008, though he conceded that the 2009 budget merely funded existing development projects rather than beginning new ones.
Egypt wants to increase private sector investment to LE 135 billion ($24.5 billion) this fiscal year from 120 billion last year, he added.
“Today, even after the (economic) decline, we are talking about LE 120 billion. This year, we have a target of reaching LE 135 billion in addition to what we are seeing coming in from the state, Reuters quoted Mohieldin as saying.
He forecast Egypt’s budget deficit at 7 to 7.5 percent of GDP for the fiscal year 2009/10, up from 6.9 percent of GDP in fiscal year 2008/09, according to Reuters.
Ensor initially congratulated Egypt for its rank among the top six countries in terms of GDP growth. Yet he grilled Mohieldin on whether Egypt’s program of reform, largely based on the IMF model of opening the market and encouraging foreign direct investment, could hold up in a fractured global economy.
“Has the economy been opened too much? Ensor asked.
Mohieldin countered that Egypt had already tried and rejected centralization in the 1960s and that no alternative to a market-based economy currently exists. He maintained confidence that with the development of new infrastructure, particularly in desalinization and the renewable energy sector, Egypt will be able to attract investment.
Unsatisfied, Ensor questioned the Investment Minister on privatization, which had gone from “a boom to a whimper. Mohieldin replied that the public sector, which once constituted 35 percent of GDP, now made up only 5 percent.
Ensor pursued the point, criticizing the lack of progress in reducing the 150 companies still under government control and an offer made to purchase a government-owned bank, which the Egyptian government turned down.
Mohieldin responded good-naturedly, saying once the US and UK released their public holdings, Egypt would follow, which drew a chuckle from both Ensor and the audience.
Investment Minister interrupted himself to convey a text message from Minister Boutros-Ghali, who wished to dispel rumors about a second fiscal stimulus package for the Egyptian economy.
