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Egypt economy grows by 0.2 pct, down on previous quarter The drop in the growth rate is driven by contraction of tourism, construction and manufacturing industries while domestic consumption prevented the economy from shrinking
Egypt's economy has grown by 0.2 per cent in the first quarter of the financial year 2011/2, according to data from the ministry of planning, Bloomberg reported Sunday. The rate of growth dropped in the period between July and October below the previous quarter, during which the economy grew by 0.4 per cent. The drop is attributed to the deterioration of income from vital economic sectors such as tourism, manufacturing and construction. "The GDP figures are actually better than our forecasts, which was for the economy to shrink by some 1 per cent," says Monette Doss, research manager at Prime Holdings. She attributes the better than expected results in light of a lower drop in household consumption. "It seems that households were not as responsive to the economic recession and the increased unemployment as expected." Egypt's unemployment rate has risen to 11.9 per cent in the third quarter of 2011, its highest level in ten years, with 3.1 million out of work. Remarkably, the third quarter's unemployment rate is 35.3 per cent higher than for the same period last year. Nevertheless, GDP growth has been hit hard with the ongoing violence in the Egypt street and the disruption of economic activity. Tourism, one of the country's top foreign currency earners, shrank a whopping 10.4 per cent, as the number of tourists dropped by more than one third. The manufacturing sector contracted 3.3 per cent and construction 2.8 per cent annually in the quarter. Investments were also hit hard, dropping 18 per cent to $7.6 billion. This is a reflection of the drop in Foreign Direct Investment (FDI) which fell to $440.1 million in July-September from $1.60 billion a year earlier. Growth in the telecommunications sector, which expanded by 3.7 per cent, eased the drop. The crisis in the economy is indicated in Egypt's budget deficit, which is forecast to growth to a maximum of 11.7 per cent of GDP as opposed to the originally expected 8.6 per cent. The surge in deficit, the Central Bank governor indicated, comes from an expected drop in tax revenues; highlighted by the decline in profitability of the telecommunications sector and a 30 per cent drop in tax revenues from the banking sector. Accordingly, a ministerial committee announced that a foreign loan of between $10-12 billion was now a necessity for the Egyptian economy.
