Recently released data shows respectable growth for July-September 2003. Mona El-Fiqi reports Although no major turnaround was observed during that period, a recent business barometer study said that for the first time in nearly two years, firms reported a rise in investment and employment. Production and sales, especially exports, continued to improve while output and input prices levelled off after experiencing a sharp increase following the flotation of the foreign exchange rate in January 2003. The business barometer is a biannual study conducted by the Egyptian Centre for Economic Studies (ECES) on the performance and expectations of the Egyptian manufacturing, construction and tourism sectors. The study is based on the views of a sample of firms across the manufacturing, construction and tourism sectors regarding their economic activity during the second half of 2003 and expectations for the first six months of 2004. A majority of firms reported an increase in their exports, a decline in inventory and improved capacity utilisation over the past six months. Moreover, they reported a modest increase in investment and hiring. However, the study said that not all sectors fared equally well. The tourism sector reported the most improvement while construction companies continued to struggle. According to the Ministry of Planning, the GDP annual growth rate increased to 4.2 per cent in the period from July to September in the fiscal year 2003/2004, compared to 3.2 per cent for the fiscal year 2002/2003 as a whole. The study credited the external sector, particularly the surge in revenues from tourism and the Suez Canal, for the improvement in GDP. Given that the change is mostly related to external demand, according to the study, the factors stimulating this growth are increased exchange rate competitiveness, improved market access abroad, the rapid recovery of tourism following the war in Iraq and the beginnings of a global recovery from economic depression. Moreover, the continuation of expansionary fiscal and monetary policies helped to reinforce this trend. For 2003/2004, the government is forecasting GDP growth of about four per cent. However, the majority of respondents are less optimistic. As much as 78 per cent of firms in the sample expect economic growth to remain the same or decrease in the first six months of 2004. The business barometer blamed the lack of transparency in monetary policy, particularly regarding the exchange and interest rates, for creating much of this gap in expectations. As for exports, 80 per cent of firms reported higher or stable levels of exports over the past six months. But sales in the domestic market were modest, as only 69 per cent of surveyed firms reported an increase or no change during the same period. Within the manufacturing sector domestic sales were highest for firms in the printing, ready-made garments and transportation equipment sub- sectors. Expectations for the first half of 2004 are mixed at best. The majority of respondents expect a moderate increase in investment and employment, due to expectations of rising exports. However, they anticipate lower levels of production and rising prices of inputs and outputs in the context of slower economic growth. The study stated that the majority of surveyed firms reported higher or stable levels of employment. The upward trend is expected to be more significant for the first half of 2004 since 86 per cent of firms plan to increase or maintain the same level of employment. As for the coming six months, the overwhelming majority of firms expect higher or stable prices for final products and 99 per cent of firms expect no change in input prices. Moreover, all firms in the study plan to either increase or maintain their levels of investment during the first six months of 2004.
