CAIRO: Egypt’s economy will grow by just 1.3 percent this financial year and 3.6 percent next as it makes a slow recovery from the disruption to tourism and investment from an uprising that ousted president Hosni Mubarak, a Reuters poll showed on Friday.
The survey of 12 economists forecast that gross domestic product (GDP) would grow by 1.3 percent in the year to June 30, 2012, well below the 3-3.5 percent predicted by the government and the 3.0 percent in the June poll.
Growth, according to the median figures, will rise to 3.6 percent in 2012/13 but that will fall far short of the rate of 6 percent plus that economists say Egypt needs to start creating enough jobs for its expanding population of 80 million people.
The poll indicated annual inflation would stay in double digits at 11.2 percent in 2011/12 and 10.9 percent in 2012/13.
Pressure on the Egyptian pound will continue, with forecasts suggesting it will weaken to LE 6.13 to the US dollar by the end of June 2013 from around LE 5.96 now.
"We expect things to pick up in (July to December 2012) … At the moment, basically we think that the direction of government policy in terms of economics is still very unclear," said Said Hirsh, Middle East economist at Capital Economics.
Egypt will hold a parliamentary election in November, but voting will take weeks, and the presidential poll may not happen until the end of 2012 or the start of 2013, leaving the army-backed interim government in power for some time yet.
Hirsh, who forecast growth of 2 percent this financial year and 4 percent next, said Egypt would not only be constrained by the downturn in tourism and drop off in foreign investment, but also by the global slowdown.
"Egypt’s main trading partner is still Europe and Europe is not going through a good time," he added.
Shares fall, yields climb
Tourists, a major source of revenue for the Arab world’s most populous nation, have started returning. But foreign investors remain wary. Many have dumped treasury bills and pulled out of the stock market.
The benchmark share index has hit its lowest point since March 2008 and yields on treasury bills have climbed to levels last seen in October 2008 during the global financial crisis.
Egypt has turned to local banks to finance its budget deficit after it turned down a $3 billion financing facility it had negotiated with the International Monetary Fund.
"We think eventually they will have to turn to the IMF otherwise they will exhaust most of their reserves," said Hirsh.
The government forecasts budget deficit at 8.6 percent of GDP in 2011/12, a figure some economists say is optimistic.
Stefan Hofer, emerging markets strategist at Julius Baer, who forecast growth of just 1.0 percent in this financial year and 3.5 percent next, remained upbeat about Egypt’s outlook in three to five years time.
"We still are very constructive and optimistic about the medium term prospects for the Egyptian economy … It is one of the leading economies in the region, it has very attractive demographics, it has got great human capital," he said.
But he also said the government needed to build up institutions and respond to the immediate aspirations of Egyptians looking for a swift change in their lives.
"There are some very fundamental challenges still facing the authorities in the current environment and they have to deliver results very quickly," he said.
