CAIRO: Egypt’s economy grew by a slower-than-expected 1.8 percent in the financial year to June 2011 and is forecast to expand 3-3.5 percent in 2011-12 although continued protests and unrest are holding it back, the Planning Ministry said on Thursday.
Egypt was hit hard by an uprising that toppled president Hosni Mubarak on Feb. 11 that sent investors and tourists packing. Some have started returning but many remain wary of the political uncertainty and ongoing demonstrations.
"We had investor delegations who were planning to come to Egypt before the ‘million march’ of July 8. They all cancelled after the protest," Planning Minister Faiza Aboul Naga told a news conference, citing one example of the impact.
The government had expected growth of 2.6 percent in 2010-11 but the economy ended up expanding by a slower 1.8 percent, she said. Egypt’s financial year runs July 1 to June 3.
In the three months running January to March, the economy contracted 4.2 percent but expanded by 0.4 percent in the following quarter, the ministry said.
Egypt’s economy had sailed reasonably unscathed through the global financial crisis, and was heading back to growth rates of 6 percent until the uprising that erupted on Jan. 25.
"There are internal and external hands for whom it is in their interest that riots and disturbances continue to prevent Egypt from moving forward and becoming more stable," she said without giving further explanation.
She said growth was forecast to be 3-3.5 percent in 2011-12.
"We are always optimistic when we put expectations and we hope that the developments undergone in this quarter will continue and reflect positively on the coming year," she said.
Tourism, a pillar of the economy, was initially hit hard but has been slowly recovering. The ministry said revenues in 2010-11 were $10.6 billion compared to $11.6 billion in 2009-10.
Despite sturdy growth before the uprising, many Egyptians said the benefits were being enjoyed by the rich, elite allied to Mubarak, while swathes of Egypt’s 80 million people were left in poverty. Those complaints drew many onto the streets.
Officials say they aim to make a fairer economy. Economists say the government needs to ensure rebalancing does not lead to populist policies that will further strain state finances.
Egypt’s budget deficit was LE 29.8 billion ($4.99 billion) in the April to June quarter, compared to LE 31.6 billion the previous quarter, the ministry said.
The government has forecast a deficit of 8.6 percent of gross domestic product this year. Economists have said that may be an optimistic expectation.
"In few days a report will be issued on the internal and external sources who would like to participate in developments," the minister said, adding that the government was working with civil society organizations on development projects.
