Gaping budget deficit INITIAL calculations of Egypt's budget deficit for fiscal year 2011/12 show that the budget deficit will reach LE170 billion, 11 per cent of GDP, according to Minister of Finance Momtaz El-Said. The budget deficit had originally been calculated to reach LE134 billion, the equivalent of 8.6 per cent of GDP. According to a Ministry of Finance statement, the deficit is attributed to increased spending coupled with lower than expected revenues. Spending on wages reached LE122 billion, LE12 billion more than originally estimated. Meanwhile, revenues, especially tax revenues, dropped by LE25 billion due to the slowdown in the economy. As for the 2012/13 budget, the statement said that expenditures will reach some LE533 billion while revenues are expected to come to LE393 billion. That being the case, the minister said the gap needs to be covered by domestic and foreign borrowing. Growth targets EGYPT is targeting a growth rate of 4-4.5 per cent this year, according to Minister of Finance Momtaz El-Said, with the aim of creating much needed jobs. Egypt grew at around two per cent in fiscal year 2011/12. Unemployment currently stands at around 12 per cent. To achieve growth, El-Said said the government intends to attract more foreign investment. A ministry statement said that 15 projects are now ready and will be offered for public-private partnerships. Inflation at bay HEADLINE consumer price index (CPI) inflation increased by 1.17 per cent month-on-month (m/m) in August compared to 0.38 per cent (m/m) in July. The annual rate increased slightly to 6.47 per cent in August compared to 6.39 per cent in July. In the meantime, core CPI computed by the Central Bank of Egypt (CBE) inched up by 0.23 per cent (m/m) in August compared to 0.58 per cent (m/m) in July. The annual rate decelerated to 5.34 per cent in August from 6.34 per cent in July. The CBE's Monetary Policy Committee (MPC) decided to keep the overnight deposit rate and overnight lending rate unchanged at 9.25 per cent and 10.25 per cent, respectively. The discount rate was also kept unchanged at 9.5 per cent. SME support THE OVERSEAS Private Investment Corporation, the US government's development finance institution, and Abraaj Capital, a leading private equity group, this week signed a $150 million commitment to establish a fund that will invest in small and medium enterprises in the Middle East and North Africa region, including Egypt. Called Riyada, the fund will have a capitalisation of $400 million and will be managed by Aureos Capital, the small and mid-cap investing platform of the Abraaj Group. BOP deficit widens THE OVERALL balance of payments (BOP) deficit for fiscal year (FY) 2011/12 widened to $11.3 billion from $9.8 billion a year earlier, according to a CBE statement. The poor performance of the BOP came on the back of the 30.2 per cent rise in the current account deficit, to reach $7.9 billion in 2011/12 compared to $6.1 billion the prior year. In addition, the capital and financial account saw a net outflow of $1.4 billion, against $4.2 billion. The trade deficit remained on the rise, to reach $31.7 billion reflecting the surge in merchandise imports by 8.5 per cent to $58.7 billion, from $54.1 billion in FY 2010/2011, while merchandise exports remained unchanged at $27.0 billion. The services surplus continued to decline, registering $5.4 billion in 2011/2012 against $7.9 billion in the previous year. This was attributed to the fall in tourism revenues to $9.4 billion, from $10.6 billion in 2010/2011, driven mainly by the decline in average tourist spending per night. In contrast, Suez Canal receipts edged up slightly to $5.2 billion from $5.1 billion in the previous year. According to the CBE statement, one of the positive factors that subdued the widening of the overall BOP deficit was the increase in net unrequited transfers, to post $18.4 billion in FY 2011/2012, driven by the rise in net private transfers (mainly workers' remittances) to reach $17.8 billion (against $12.4 billion in the previous year). The capital and financial account revealed that portfolio investment in Egypt registered a net outflow of $5.0 billion in the year in question (against $2.6 billion a year before). This was partly ascribed to foreigners' sales of their holdings of securities, especially Egyptian treasury bills (TBs) that saw net sales of $4.0 billion during the year (against net sales of $3.1 billion in the previous fiscal year). Another factor was the reversal in foreigners' transactions in the stock market into net sales of $1.1 billion (against net purchases of $316.7 million in the previous FY). Foreign direct investment in Egypt recorded a net inflow of $2.1 billion in 2011/2012, against $2.2 billion a year earlier. More online customers EGYPTIAN consumers are showing a growing interest in buying computer games and software online, says a recent report issued by Nielsen, a global provider of information about consumer activities. According to the Nielsen study, 36 per cent of Egyptian respondents reported they planned to purchase computer games and software from Internet websites (that is a 24 per cent increase in two years), 35 per cent said they will buy mobile phones or devices with Internet access in the next three to six months. The study also found that 51 per cent of respondents said they used the Internet for grocery shopping research. Car accessories, entertainment tickets, cosmetics products and travel service reservations also witnessed increases in the number of purchases online by Egyptian consumers. "While consumer electronics report the highest penetration for digital shopping intentions, online influence is clearly growing," said Ram Mohan Rao, president and managing director of Nielsen Egypt. "Marketers need to determine which consumers are embracing digital for their shopping needs so they can focus on the right shoppers with the right digital strategies to improve consumers' online experience." Rao added: "The Internet, and more specifically e-commerce, will be successful to varying degrees of impact on consumer packaged goods depending on the product category."
