CAIRO: The Egyptian economy grew 6.85 percent in the July-September quarter of 2007, said Minister of Economic Development Osman Mohammed Osman. The current rate of growth inched down, compared with 7.2 percent in April-June and 7.1 percent in the fiscal year 2006/7, which ended in June. "The economic growth reflects the economy s ability to grow consistently to reach 8 percent in the current five-year plan period, with the construction, tourism and transportation sectors driving growth, Osman said at a press conference Wednesday. According to the ministry, growth in the construction sector was strongest at 16.2 percent, compared to 15.2 percent in the same quarter of last year. Tourism followed, growing 16.1 percent against 6.8 percent in the same quarter of 2006. Agriculture also contributed by 62 percent of the country's growth rate. Domestic implemented investments grew 36 percent to LE 33.5 billion from LE 25.7 billion in the same period last year. Telecommunications, transport, the Suez Canal and manufacturing also performed above average, according to the ministry. Economic growth in Egypt was boosted by recent dramatic increase in foreign direct investment (FDI). Minister of Investment Mahmoud Mohieldin said Wednesday that FDI in Egypt climbed 82 percent in fiscal year 2006/07, reaching the current $11.1 billion figure. Mohieldin added that FDI was across the board, with 28 percent in oil and gas, 25 percent in privatization and sale of assets, and 47 percent in new projects or expansion of existing ones. On the flipside, inflation remains a concern, as economic growth, by definition, pressures inflation rate. "Generally speaking, inflation is caused by growth, said Riham El Desouky, economist at Beltone Financial. "Slow down in growth can partially reduce inflation, but still it cannot be measured on a quarterly basis because our economy is not that dynamic. The country's inflation rate has recently been fluctuating. Inflation rate peaked to over 12 percent last winter after a surge in gasoline prices - due to subsidy cuts - coupled with an outbreak of bird flu. The economy later recovered, and inflation took a downward trend to settle just under 8 percent last October. However, Egypt's economic growth, seasonal Ramadan shopping sprees, and a recent depreciation in the value of the dollar ignited caused inflation rate to rise 8.5 percent in the year to August, above government as well as market expectations. Osman confirmed that inflation rates were following a downward trend, expecting a further drop by year-end. "You need a lag period of several quarters to [determine where inflation now stands]. You can't expect that a slow down in growth will immediately reduce inflation, El Desouky commented. In other news, the Ministry of Economic Development announced Wednesday that unemployment in Egypt fell to 8.9 percent in the third quarter of 2007, from 11.1 percent a year earlier. Out of a workforce of 23.54 million, there were 2.1 million unemployed people during the July-September 2007 quarter, compared to 2.5 million in the third quarter of 2006.
