Egypt Business Forecast Report Q4 2010 - New Report Published
Egypt Business Forecast Report Q4 2010 - New Report Published
Saturday, August 7,2010 15:00

The overall Egyptian economy looks relatively well positioned compared with the sluggish recovery being experienced in the rest of the world, especially in developed states. Although we expect exports to act as a drag on economic growth over the medium term, we see Egypt in place for a return to near-trend growth over the longer term, lifted by increasing private sector demand and investment. Nonetheless, with upcoming parliamentary and presidential elections, there are risks that could overshadow these positive developments. If the political instability degenerates into public dissatisfaction, we caution that downside risks to economic performance and business environment could arise.

Our political outlook section focuses on the uncertainty currently reigning in Egypt's political arena, addressing three major developments: the Shura council elections, the Turkish flotilla incident, and the endorsement by the Muslim Brotherhood of opposition presidential candidate Mohamed ElBaradei. With all these political risks, the Egyptian government faces an uncomfortable 18 months, and may well decide to bring forward the presidential polls, in part to prevent Baradei from gaining even more momentum, and in part to avoid another year of uncertainty (which is threatening to harm the economy, as investors and market players stay away).

Our view that the Egyptian economy will be more affected by the sluggish global recovery than has been priced in seems to be playing out. The latest figures support our view that Egyptian economic growth will accelerate slightly in FY 2009/10 to 4.9%. However, with the recovery in consumption tailing off, much of the growth has been driven by collapsing imports, and the one area of consistent improvement throughout the year - exports - is under threat from a renewed slowdown in developed economies and global trade. Therefore, we maintain that a drop back to 4.8% in real growth in FY 2010/11 is likely as weakening external demand weighs on growth. We forecast the growth rate to improve through 2011-2014, averaging 5.2% on the back of a solid recovery in exports and receding risk aversion.

T he business environment going into Q310 has persistently shown mixed signals. Recent developments have witnessed increasing investment in infrastructure. A tunnel underneath the Suez Canal is to be built with exclusively non-budget funding, easing trade and increasing attractiveness for foreign investors. Also, the Middle East's largest low-cost air carrier, Air Arabia, has inaugurated its direct services from Egypt (Alexandria) to the UAE 's Abu Dhabi. On the other hand, persisting political instability in the run-up to the elections will cause the government to abstain from imposing much-needed austerity measures. Short-term political risk could act as a deterrent to foreign investment

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Egypt Business Forecast Report Q4 2010: http://www.companiesandmarkets.com/r.ashx?id=IRH7CI108329197&prk=ab5f8eb7533b2489a281eb34353270ed

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