(AFP PHOTO / MOHAMED EL-SHAHED)
President Abdel Fattah Al-Sisi’s recent election victory is an economic bonus thanks to military, judicial and bureaucratic support, the Global Focus report of the third quarter of 2014 stated.
Despite “unpopular measures” to cut the energy subsidies bill in the new budget to reduce debts, hopes are high that Al-Sisi will introduce stability on the political front. The report, prepared by British banking and financial service company Standard and Chartered, also added that these changes would initiate reforms to boost the economy.
“We believe Egypt will likely enter into a standby agreement with the IMF [International Monetary Fund] soon,” the study said.
Egypt suspended two-year negotiations with the IMF over a $4.8bn loan due to the influx of cash from the Gulf, according to 2013 statements from former Minister of International Cooperation, Ziad Bahaa El-Din. Gulf countries pledged a total of $12bn in economic aid to Egypt following the ouster of former president Mohamed Morsi in July 2013.
The report noted that the Gulf assistance packages have helped Egypt to trim its budget deficit from 14% in FY 2012/2013 to 12.5% in FY 2013/2014.
Commenting on his economic plan, the report said that President Al-Sisi has outlined “an ambitious strategy” to revive the economy and deal with unemployment issue.
Al-Sisi pointed out in his inaugural speech from the Itihadiya Palace on Monday that he will work on boosting the economy by developing industry and agriculture and attracting direct investments. In his platform, Al-Sisi pledged to decrease unemployment to 8% by FY 2017/2018.
With regard to the development projects which Al-Sisi said he will adopt, the report said that the Development Corridor project is estimated to cost over $140bn over the next 10 years. The project, originally designed by Egyptian scientist Farouk El-Baz proposes a superhighway west of the Nile from the Mediterranean Sea to Lake Nasser. It is expected to create new opportunities in the agriculture, industrial, trade, new communities and tourism sectors.
Egypt’s economic position was negatively affected by a decline in foreign direct investments (FDI) and tourism arrivals, frequent disruptions to the main gas export pipeline to Jordan and Israel and high inflation and rising prices, the report said.
However, it expected that the Central Bank of Egypt (CBE) will control inflation by cutting its policy rate by 50 points in the second half of 2014.
The country’s annual urban consumer inflation slumped to 8.2% in May, down from 8.8% in April, the Central Agency for Public Mobilization and Statistics (CAPMAS) said on 10 June.
In April, the CBE kept its official interest rate on hold for the third consecutive time “to balance increasing inflation rates”, it said. The state’s bank kept interest rates unchanged for two consecutive months in January and February after cutting it by 50 basis points in December.
Citing it as a positive outlook, the report mentioned: “The EGX 30 Index rallied to 8,727 points on 22 May, up more than 93% since the caretaker government took office in July 2013,” it said.
