CAIRO: Egypt’s economy is seen growing slightly faster this fiscal year than previously thought and should outpace most economies in the Gulf region thanks largely to rising consumption and foreign direct investment.
A Reuters poll of 12 economists predicted that the most populous Arab nation’s gross domestic product (GDP) would grow 5.5 percent in the fiscal year ending June 2011.
That is slightly better than the 5.3 percent recorded in 2009/10 and the 5.2 percent median forecast in the last poll, taken in June.
Ten economists in the latest poll saw the economy growing at the same 5.5 percent rate next fiscal year as well.
This means that Egypt will probably outpace all the Gulf Arab states excluding Qatar, which is seen posting double-digit growth. But it is slightly below the 6 percent Egyptian officials have forecast for the current fiscal year.
The financial crisis hit Egypt’s Suez Canal revenue, foreign investment, tourism and remittances from Egyptians living abroad, but these sectors have since started to recover. "We have seen a rebound in tourism and remittances, which will help have strong consumption growth this year," said Mohamed Abu Basha, an economist at investment bank EFG-Hermes.
"Investment activity is also strengthening in a number of sectors, including oil and gas and infrastructure. There is a large pipeline for infrastructure projects whether it’s in water, electricity or roads," he said.
Economists have said Egypt must maintain 6 percent growth or more to create enough jobs for its swelling workforce and reduce poverty. About 600,000 to 700,000 people enter the jobs market each year in the country of about 78 million.
The economy grew 5.3 percent in the fiscal year that ended in June 2010, after dipping to 4.7 percent the year before, when the global crisis was at its height. GDP had grown by about 7 percent in preceding years.
Egyptian officials said on Tuesday that they expected the economy to grow at least 6 percent this fiscal year. Roughly that level of annualized growth is also expected in the July to September quarter.
The Reuters poll also found that economists expect inflation to reach 10.9 percent this fiscal year before dipping to 10 percent the following year.
For that reason they expect Egypt’s central bank to snip the overnight lending rate by 25 basis points to 9.5 percent this year and next. The current rate is 9.75 percent.
The Egyptian pound is seen holding at 5.70 pounds per US dollar this year and next.
Analysts say Egypt’s currency seems unlikely to rebound substantially from the 5.70 level any time soon because investor appetite for Egyptian assets may be blunted by uncertainty before a 2011 election — and the central bank may prefer a weaker pound.
