CAIRO: Amidst the sound and fury of today's global economic turmoil, experts in Egypt have long claimed that the country would handle the crisis better than most. But this week, the Ministry of Economic Development issued a report with numbers that suggest the economic crisis may finally have reached Egypt's shores. The report is not so much a bleak forecast as much as it is a realistic assessment of the uncharted economic waters in which Egypt finds itself. Egypt's economic growth for the first quarter of this fiscal year, says the report, was 5.8 percent as compared to 6.5 percent for the same quarter last year. "It will be very difficult to reach the 6 percent growth set by the government, said Suha Najjar, managing partner and head of research at Pharos Holding, referring to the growth projection set by the Egyptian government for fiscal year 2008/2009. Najjar noted that this report to her was particularly troubling. The effects of the global crisis, she said, "came through much quicker than expected. "At least in the first quarter or two you shouldn't be affected that much since pre-crisis business contracts should still be playing out. That the crisis hit this soon in Egypt, she added, is indicative of its unanticipated severity. Despite the crisis' global strength, argues Mai Bahy, GDR trader at investment bank Naeem Brokerage, "We might be amongst the better economies in the region. The report by the Ministry of Economic Development issued figures describing which industries, specifically, had suffered as a result of the slowdown. The construction industry, in particular, has been hard hit, reporting a growth of 9.5 percent for the last quarter, as compared to 14.4 percent growth a year ago. The manufacturing industries have also taken a hit, recording a 5.3 percent growth last quarter, down from 7.7 percent a year ago. Industries including communication, tourism, transportation, and agriculture also reported slowdowns. Nominal GDP was LE 274.6 billion. Bahy expressed worry at the decline in growth of the tourism industry, in light of the ambitious growth program expressed by the government. "Tourism is one of our main sources of income in Egypt. Definitely there will be a slowdown there but maybe there will be a restructuring of hotels, she said. Najjar sees it in a different way. "The troubling sectors are construction and real estate, she said. She further expressed her belief that certain industries, like tourism, are fail safes for the economy. "I believe that even if foreign investment dries up, tourism and the Suez Canal and expatriate remittances become your bread and butter, she said, noting that these forms of income are the "most solid and consistent. Najjar also noted that she has yet to see indications that Egypt is in deep trouble. A reduction in the sales of basic food items, she argues, would be that alarm. "If those go down, she says, "then we know we are in trouble because people will not be able to buy the basics. "We do not have evidence they are going down, she added. Within the bad news issued by the ministry, one significant piece of good news stands out. Revenue brought in by the Suez Canal was up 21 percent during the first quarter of this fiscal year, as compared with last year. Bahy, though, sees storm clouds on the horizon. Echoing recent sentiments, she said the increased piracy through the Gulf of Aden "is a major problem. She added her worry that failure to contain the pirates could result in a major loss in revenue for the state. A number of vessels are already taking the alternative route down through the Cape of Good Hope, even though it makes the trip several days longer. In all, despite a slowing of growth, Egypt seems to be experiencing a condition far removed from the recessionary environments that are ailing the West. Both analysts predict that 2009 will be a challenge for Egypt but that given proper management, the economy should pull through with minor harm done.
