Egypt looks unlikely to hit 4 per cent growth target
Egypt's economy is unlikely to grow as quickly as the government has forecast for this financial year, economists polled by Reuters predicted, dampening hopes Egyptians will see quick benefits after an uprising driven partly by economic grievances.
In its budget for the fiscal year that began on 1 July, the government predicted gross domestic product (GDP) would grow by 4 to 4.5 per cent in 2012/13, a forecast that ministers have regularly reaffirmed in recent weeks.
"I think it's a bit optimistic for the coming year. If there is austerity in Egypt, the government will have very little power to stimulate the economy," said Said Hirsh, an economist with Capital Economics.
Ten economists who contributed to a Reuters survey conducted 11-24 September expected the economy to grow by only 2.7 per cent in the fiscal year to 30 June 2013, with the rate accelerating to 4.0 per cent for the year to end-June 2014.
In several years before the popular uprising ousted Hosni Mubarak in February 2011, Egypt's economic growth was around 7 per cent, which was barely enough to produce work for the large number of Egyptian youth entering the job market.
Egypt economy grew by 2.2 per cent in 2011/12 which ended in 30 June, mainly driven by favorable base effects in the last two quarters, according to Ministry of Planning figures.
Finance Minister Montaz El-Said said earlier in September that Egypt's economy could reach a growth rate of 7.5 per cent during the coming 3 years which would create 750,000 new job opportunities.
Egypt's prime minister has told investors he is working on measures to make Egypt more attractive.
The new government is putting the final touches on an economic reform programme it hopes will satisfy the IMF it is serious about getting a persistently high budget deficit under control, paving the way for a $4.8 billion financing package.
The finance ministry on 11 September revised last year's budget deficit figure upwards to 11 per cent of GDP, saying spending was swollen by rising wage demands and revenue was trimmed by a fall in tax receipts.
The reform programme includes cutting government costs by directing energy subsidies to those who need them most. The reduction in these subsidies, which make up about a quarter of total government spending, is likely to boost inflation by raising prices of cooking gas, gasoline and diesel.
The economists in the poll on average forecast a budget deficit of 10.6 per cent of GDP for this year and 9.5 per cent for 2013/14.
They forecast inflation would average 8.6 per cent this fiscal year and an even higher 8.9 per cent in 2013/14.
By comparison, Egypt's urban consumer price inflation in the 12 months to August was 6.5 per cent, near its lowest level in six years.
The economists predicted a negative current account balance of 2.9 per cent of GDP in 2012/13 and a negative 2.4 per cent in 2013/14.