The Egyptian economy grew slightly below market expectations at an annual 4.1 percent rate in the second quarter of the 2008/09 fiscal year ending in June, compared to 7.7 percent in the same period a year earlier. Cabinet spokesman Magdy Rady described the slowdown in growth as scary but said it was beyond the control of the government. The fiscal year started in July. He said the growth of Suez Canal revenues fell sharply to 1.4 percent in the second quarter of the current 2008/09 fiscal year from 22 percent in the same period a year earlier. The Suez Canal is the biggest sector that was impacted during the quarter, he said. The Suez Canal is a big contributor to growth, said Mohamed Abu Basha, an economist at Egyptian investment bank EFG-Hermes. The economy grew 7.2 percent in the 2007/08 fiscal year, 0.7 percentage points of that coming from the waterway, he told Reuters. The canal is an important source of foreign currency for Egypt, along with tourism, oil and gas exports and remittances from Egyptians living abroad. A cabinet statement said a drop in the revenues of oil and natural gas exports due to the decline in international prices drove Egypt s trade deficit up by 25 percent compared with the first quarter in the current fiscal year. The statement said economic indicators in the second quarter reflect the impact of the global financial crisis in a deeper way in the Egyptian economy. Reham ElDesouki, a senior economist at Beltone Financial investment bank, said the growth rate was slightly below her forecast of 4.5 percent. Abu Basha said a slowdown in private consumption and tourism were likely a main reason behind the weakening economic growth. He said real gross domestic product (GDP) was expected to grow 4.8 percent in 2008/09 and 3.4 percent the following year. Finance Minister Youssef Boutros-Ghali said this week the country was facing the threat of a serious contraction because of the global financial crisis, which has started to hit tourism, investment and the Suez Canal. A cabinet statement on Wednesday said unemployment in the second quarter rose to 8.8 percent from 8.6 percent.
