Egypt’s economy, buoyed by rising exports, could grow by 5.5 percent in fiscal 2010/11 and attract $10 billion in foreign direct investment (FDI) as it recovers from the global economic crisis, a minister said.
The growth forecast matches the consensus of 15 independent economists polled by Reuters last month and is stronger than projections for any of the Gulf Arab states apart from Qatar and for neighbours Turkey and Israel.
“Factors contributing to this 5.5 percent growth are Suez Canal growth rates and the exports growth level going back to normal,” Economic Development Minister Osman Mohamed Osman said.
Osman said tourism, a foreign currency earner accounting for around 11% of Egypt’s gross domestic product, had bounced back from troughs in late 2008 and early 2009.
“Tourism figures indicate that numbers of tourists, touristic nights and revenues have returned to levels from before the financial crisis,” he told a news conference.
Egypt, while protected from the worst of the crisis, was hurt by a decline in tourism earnings, Suez Canal revenue and foreign investment. Growth fell to 4.7% last year after having sped along for three years at around 7%.
Osman said investments in Egyptian industry were 13 billion Egyptian pounds ($2.4 billion) in the six months to the end of 2009, with 80 percent of that coming from the private sector.
Total investment in the three months to end-December was 55.7 billion pounds, up from 52.5 billion in the same period a year earlier. Of this, private investment made up 67%.
“All we can do is to encourage the banking sector to increase lending. And as you can see, most banks are lending more to small and medium-sized firms. All we can do is to encourage the central bank to offer cheaper lending,” he said.
“And that’s why interest rates have been cut in the previous period,” Osman added.
The central bank cut its key overnight lending rate six times in 2009, to 9.75% in September from 13.5% in February, but since then has kept it steady.
Non-oil exports added $4.67 billion to Egypt’s earnings in the last quarter of 2009, up from $3.72 billion in the same period of 2008, Osman said. The petroleum and mineral sector grew 5.6% in the period, he said without giving figures.
Egypt was targeting FDI of $10 billion this fiscal year and the same amount in the next fiscal year, Osman said, indicating growing confidence in the ability to attract cash from abroad.
Earlier this month, Trade Minister Rachid Mohamed Rachid said the $10 billion target for 2009/10 would be “a tough one” and that demand remained low in export markets such as Europe and the United States.
“We had expected FDI in fiscal 2009/10 would reach $8.5 billion, rising to $9.5 billion in 2010/11,” said Reham ElDesoki, an economist with Beltone Financial.
“We had believed it would be challenging for the government to reach its $10 billion FDI target this year due to the still challenging global environment and slower growth,” in Gulf Arab states and the European Union, she said in an email.