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Egypt Business Forecast Report Q2 2010
Management Report
Published: February 2010
Pages: For full details, please email keithw@cmsinfo.com
Tables: For full details, please email keithw@cmsinfo.com
From: GBP 480.00 Buy Now!
Research from: Business Monitor International
Sector: Regional Markets
As we move into 2010, the markets have continued to bounce and the global macroeconomicrecovery is still broadly in play. Egypt has been one of the most resilient economies in the MiddleEast and North Africa region and, by and large, our outlook remains a very favourable one. True,the pace of reform of the business environment has slowed in the light of the economic slowdown,but the country’s economic potential is huge and investor perceptions remain very favourable.2010/11 will likely see both parliamentary and presidential elections, however, and we are notconvinced that the pain for consumers is over just yet.
On the political front, we look beyond the immediate risks this quarter and investigate longer-termscenarios for political change. Although our core scenario is for gradual democratisation, we dothink that the Egyptian population would like to see a more Islamic type of government and thereis always the risk that this could come about through violent or undemocratic means. Over the longterm, the pent-up frustrations of an impoverished population that is fundamentally at odds with thegovernment will have to be relieved. Against this backdrop, Egypt is at risk of an unconstitutionalchange of government, but this would require the support of the army. As such, we are inclinedto foresee gradual constitutional change.
Economically, our views have not changed substantially since our last Business Forecast Report.We see a slowdown in 2009/10, followed by a return to near-trend growth thereafter, with a broadlypositive outlook in general (barring any major political shocks). We see real GDP growing by 3.5%in 2009/10, a slowdown from 2008/09 in spite of the apparent recovery, based on our view thatthe full effect of the global slowdown has yet to play out in terms of consumption and our concernsthat the global economic recovery will not be enough to drive a resurgence in demand for Egyptianexports and tourism services. However, the rate will bounce back in 2010/11 and average 5.0%for the remaining four years of our forecast period.
As far as the business environment is concerned, developments over the last quarter have beenless than inspiring. Perhaps the most pro-market policy we have heard about is the stock market’sapplication for approval for short selling from the state regulator. However, in the current climate,moves like this are not necessarily going to be successful and we do not expect the governmentto be in a hurry to approve any measure that could increase market volatility. Likewise, the energyministry has delayed a move to reduce subsidies. While this is short-term positive for the businessenvironment, because its keeps costs low, it illustrates an ongoing low level of market orientation.
Economically, our views have not changed substantially since our last Business Forecast Report.We see a slowdown in 2009/10, followed by a return to near-trend growth thereafter, with a broadlypositive outlook in general (barring any major political shocks). We see real GDP growing by 3.5%in 2009/10, a slowdown from 2008/09 in spite of the apparent recovery, based on our view thatthe full effect of the global slowdown has yet to play out in terms of consumption and our concernsthat the global economic recovery will not be enough to drive a resurgence in demand for Egyptianexports and tourism services. However, the rate will bounce back in 2010/11 and average 5.0%for the remaining four years of our forecast period.
As far as the business environment is concerned, developments over the last quarter have beenless than inspiring. Perhaps the most pro-market policy we have heard about is the stock market’sapplication for approval for short selling from the state regulator. However, in the current climate,moves like this are not necessarily going to be successful and we do not expect the governmentto be in a hurry to approve any measure that could increase market volatility. Likewise, the energyministry has delayed a move to reduce subsidies. While this is short-term positive for the businessenvironment, because its keeps costs low, it illustrates an ongoing low level of market orientation.