From the Daily News Egypt:
As the hot waves of the US subprime crisis continue to melt down the global economy, many are questioning Egypt ability to maintain its record high growth rates in the current fiscal year.
While statements from government officials point to the affirmative, a recent Reuters opinion poll predicts Egypt’s economic growth to ease below the government’s target of more than 7 percent in the current fiscal year 2008/09.
Reuters’ interviews with 11 economists between July 16 and 22 showed that real gross domestic product (GDP) is expected to grow between 4.8 and 6.8 percent in the 2008/2009 fiscal year, which started on July 1, dragged by a slowdown in investment and private consumption.
Ania Thiemann, senior Middle East and North Africa analyst at the Economist Intelligence Unit, told Reuters she expected real GDP growth to ease to 6.7 percent from an estimated 7.1 percent in 2007/08.
“With the turmoil in international financial markets, the cost of capital is rising, and even though a lot of investments in Egypt are boosted by the high liquidity in the Gulf, I can’t see that continuing,” she said in the poll.
EFG-Hermes Economist Muhammad Abu Basha also said a slowdown in private consumption growth in the first quarter of 2008 to 2 percent from 6 percent in the previous quarter was likely to hurt economic growth.
“Inflation is eroding the growth of private consumption,” he explained.
The Cairo-based regional investment bank recently downgraded its forecast for GDP growth in the current fiscal year to 6.2 percent from 6.6 percent.
If these forecasts come to pass, this lower rate will be a blow to government’s relentless attempts to sustain last year’s 7.1 percent growth rate, which has been the pride and glory of Cabinet leaders.