Poor economic indicators, including modest growth rates, dwindling foreign direct investment (FDI) and faltering tourism revenues, came as no surprise as ministers from the government's economic team tried to explain the poor performance of the Egyptian economy over the last three years during the Euromoney Conference held in Cairo on Monday. Minister of Finance Ahmed Galal said that Egypt's debt had reached LE1.8 trillion, along with a modest growth rate of 2.2 per cent and a budget deficit ranging between LE200 and LE240 billion. Addressing the 19th annual Euromoney Conference, Galal said that the government aimed at reducing the budget deficit by four per cent to reach 10 per cent of GDP in the current financial year. The deficit in the 2012/13 fiscal year, which ended in June 2013, reached LE240 billion, or 13.8 per cent of GDP. In 2013/14, the government forecasts a deficit of 9.1 per cent, a target built on the assumption that economic growth will pick up during the year. But despite the gloomy picture of the economy and the declining FDI, which dropped from its peak level of $13 billion in 2007/08 to some $2.2 billion in 2010/11, Egypt had continued to attract FDI, Osama Saleh, the minister of investment, said. He said that despite the political instability in the country, FDI had increased from the $2.2 billion recorded in 2010/11 to $4 billion in 2011/12 and to $3 billion in 2012/13, adding that a handful of foreign investors had established companies in Egypt after the 25 January Revolution. In a bid to ramp up investment, Saleh said that the government had been working on stabilising the investment climate, stating that it had amended the investment law as well as Law 89 concerning land allocations. “We did this in order to close the loopholes that had appeared after the revolution,” Saleh said, adding that the government was working on easing the licensing system for investors. Saleh said that despite the turbulence, economic growth had continued, albeit at a slower rate, and that he was optimistic about the economic outlook. “With more security and stability, and after the parliamentary and presidential elections to be held next year, the economy will start real growth,” he said. The investment minister added that Egypt would be finalising a tender for the development of the Suez Canal by the end of the month, adding that no country “would take the lead, as this is an Egyptian project.” A previous draft law for developing the canal, proposed during the rule of ousted former president Mohamed Morsi, had triggered many reservations as it had given Qatar, an ally of the former Muslim Brotherhood government, an upper hand in the project. In a few weeks' time the Gulf-Egyptian Investment Conference would take place, in which Gulf investors would come to Egypt in order to finalise investment deals, Saleh said, adding that in January there would be a similar delegation from the United States. While they were in a wait-and-see mood, private-sector representatives at the conference expressed their optimism. Hisham Al-Khazindar, co-founder and managing director of Citadel Capital, said that the current government was the most competent Egypt had seen over the last three years. He said that generous Arab aid after the 30 June Revolution had helped the interim government to bring a sense of normality to proceedings, which the previous government had failed to achieve. Al-Khazindar also supported the government's stimulus plan. The finance minister said Egypt's second economic stimulus package would be launched by the end of this year. While the first package had been valued at LE23.9 billion, recently increased to LE29 billion, the new one would be worth around LE24 billion, he said. However, domestic and foreign investors expressed their concerns regarding the clarity of the government's taxation policies and its intention to liberalise prices, said Omar Al-Hamamsi, managing director of law firm McKinsey & Co Egypt. Political instability and a lack of clarity have hampered private investment in the country, which has dropped over the past three years. Nada Shousha, country manager for Egypt, Libya and Yemen at the International Finance Corporation, said that many projects had been delayed over the past three years and that it was important for the private sector to act as an engine of growth, as it represented 63 per cent of GDP and employed 70 per cent of the labour force. In order for Egypt to overcome its economic challenges, Shousha said that it was in need of inclusive economic growth that would include women, youth and investment in Upper Egypt. “Egypt needs inclusive growth, otherwise people will go out onto the streets again,” Shousha said.
