The Egyptian economy has certainly fared well during the crisis. The nature of the domestic economy versus the dynamics of the global financial turmoil was a crucial factor in its resistance.
The economic rationale behind the government’s reaction, as implemented through different financial institutions, was another crucial factor in mitigating the dire consequences that occurred locally- -as happened almost everywhere else.
In an interview with Alborsa (see inside), the Minister for Economic Development Osman Mohamed Osman described the government’s post-crisis slogan as “The Egyptian Economy Retaking Off.” Achievements of the past year show that such aspirations might be feasible.
During the crisis, Egypt was able to swim against the global pessimistic tide, hitting a 5.1 percent GDP growth rate in the period from October to December 2009, and 4.9 percent in the previous quarter, according to Prime Minister Ahmed Nazif. In the fiscal year 2008/09, during the darkest times of the global crisis, Egypt managed to reach a GDP growth rate of 4.7 percent.
This was due to growing confidence in the Egyptian economy, an attractive business climate, resilience in domestic consumption, and rapidly growing sectors such as construction and communications.
In addition, the government’s public-private partnership (PPP) strategy, and the stimulus packages presented by the government (estimated as worth 1.3 percent of GDP), were intended to avert the negative effects of the crisis by pushing domestic demand and supporting local companies in production and job creation.
On the other hand, the picture is still not that rosy, nor has the government been able to work miracles. Public revenues decreased by 28 percent during the second quarter of the current fiscal year, in comparison to the same period last year.
The budget deficit has increased, from LE23 billion during the first half of the current fiscal year, to its current figure of LE58 billion. And unemployment is estimated to stand at 9.4 percent of the labour force, a fact which means the government still has to find jobs for a vast number of Egyptians currently sitting in coffee shops.
Contradictions in statements between ministers from the same government are witnesses, with optimism and pessimism concerning the crisis fluctuating depending on the occasion or natural of a press event, whether it is local or international- -creating the perception of a lack of coordination and accuracy.
Former economic minister Nawal Al-tatawy confirms that the influences of the economic crisis still bear a toll on Egypt. This is reflected in the budget deficit, high unemployment and high inflation rates. According to Altatawy, such an impact should not detract from the economic crisis still bear a toll on Egypt. This is reflected in the budget deficit, high unemployment and high inflation rates. According to Altataway, such an impact should not detract from the economic development that has been taking place recently, but those feeling optimism for such positive development should nonetheless not lose sight of the need for an effective programme or measures delaying with the ongoing negative circumstances.
According to a study of 50 businesspersons and financial sector experts carried out by Alborsa (see inside), there are still some obstacles hindering investment. Forty-six percent of the respondents surveyed believed improvements made to the mechanisms, procedures and time required for issuing licenses and industrial permits have been limited, and are negatively impacted by government bureaucracy.
Fifty-nine percent of the experts surveyed said that the newly modernized economic courts do not yet work efficiently, and that time is needed for their development through training and education before they will be of benefit.
It is clear that the crisis last year was painful to the local economy which witnessed a slowdown, with exports investments, tourism and Suez Canal returns all dropping. However, Prime Minister Nazif in October announced the government’s goal of restoring growth rates to post-crisis levels, of seven percent, within two years.
Maybe the seven-percent growth rate achieved in the past was supported by an economic boom, but now the driving force to reach such an ambitious goal must depend on local planning and motivation.
Practically and transparency will defiantly be crucial factors for the success of any “economic take-off” marketed by the government, especially after the Minister of Trade and Industry, Rashid Mohamed Rashid, made it clear at the World Economic Forum in Davos this month that”2010 will be hard on the Egyptian economy.”
This article is originally published by Al Borsa