CAIRO: Egypt’s economic situation should stabilize on the long-term, according to a trade forecast published last week by HSBC Bank.
The next 15 years will witness the rise of the Egyptian economy on the international scene, along with many other emerging countries such as India, China, Indonesia and Brazil, the report said.
CAPMAS said on Monday that Egypt’s trade deficit narrowed by 14 percent in July from a year earlier to LE 13.5 billion ($2.3 billion), Reuters reported.
Exports increased 26 percent by value to LE 15.9 billion due to a rise in the value of commodities, especially petroleum products, crude oil and fertilizers. Imports grew 4 percent to LE 29.4 billion, CAPMAS said.
According to the HSBC Bank report, Egypt, which accounted for 0.3 percent of world trade at the end of 2010, should be able to reach the 0.4 percent level by 2025 thanks to a 270 percent growth of the country’s overall trade volumes.
The country’s merchandise trade volumes will skyrocket to $201.83 billion by 2025, from only $71 billion in 2010.
Key export sectors of the Egyptian economy (petrol, petro-chemicals, petroleum oils and gold) are set to remain dominant as core drivers of export revenues, which means the economy can benefit while oil prices are high.
The forecast also expects exports to exceed imports in the next five years, although the gap between the two should narrow afterward. The annualized growth rate of exports should stabilize at 30 percent in 2011-2012, falling over the 18 percent level the following two years.
The Trade Confidence Index shows that in the next six months, trade within the Middle East will remain the most popular among Egyptian businesses. Around a third of traders in Egypt are doing business in Greater China while Latin America has also emerged as a new region of interest for Egyptian businesses.
While the United States, Italy and Saudi Arabia are going to be three of the five largest import and export partners, Spain and India will also be privileged export partners.
With a 9.63 percent annual increase of imported manufactured goods, China will play a key role in the reconstruction of Egypt over the next 15 years, along with Germany and the United States, which will turn out to be two of Egypt’s largest trade partners by 2025.
Malta, a growing trading route between Europe and the MENA region, will see bilateral trade with Egypt grow to values of $7.4 billion by 2025 from the current of $1.1 billion.
Egyptian small and medium sized businesses have every chance to become drivers of trade over the next 15 years, while the forecast also predicts a strong focus on technology with wires, insulation and fiber optic cables being among the eights largest export sectors in the past five years.
Traders, however, will have to wait a few more months, says HSBC, before the Egyptian economy really takes off again, since the recent uprising has profoundly affected the country’s finances.
The year has seen a drop in trade volumes as annual inflation reached 12 percent in August and unemployment increasing from 9 percent in 2010 to 11.8 percent in 2011, according to CAPMAS. Main revenue earners tourism and remittances have also taken a hit.
"We all agree that on a middle-term period, the Egyptian economy will be able to take off again, and we will see the positive impact of the revolution. But for now we need to focus on the transitional period and make it as short as possible, by reestablishing security and political stability," explained Magda Kandil, head of the Egyptian Center for Economic Studies.
The analyst also complains about the lack of any clear economic policies, any directives showing where the country is heading, adding that "the government must support small and middle businesses, and make sure Egypt receives all the financial aids we were granted."
But one of Egypt’s biggest problems remains the departure of many foreign companies, because of current instability. "Foreign investors have been complaining about the bureaucracy and the way the official institutions are working.
“They say there are too much hesitations and no clear directions" explained Kandil, who stressed on the importance of sending positive signals to foreign investors by respecting previous commitments.
"We can [review] contracts signed under the previous regime, but at the same time we have to make sure that those contracts will be respected."
