After years of uncertainty and turbulence, Egypt's economy is beginning to show some signs of recovery, with a marked rise in business confidence helping to strengthen indicators in both capital markets and the broader economy. Emerging signs of growth are welcome not only for investors, but also for the government, following the economy's decline since the 25 January Revolution in 2011. The political upheaval pushed GDP growth down to 2%, and depleted foreign currency reserves by half, while both foreign and domestic investors fled, sending the benchmark Egyptian Exchange (EGX) 30 stock market index down by nearly 50% at its lowest point. The rebound in the stock market is one indicator that suggests Egypt has turned a corner. The EGX 30 has rallied recently, not only recouping previous years' losses but pushing past pre-revolutionary levels by more than 20%. The upward momentum has attracted a flood of new listings, according to the chairman of the EGX, Mohamed Omran, in a recent interview with Reuters, with 10 companies expected to list by year-end. The recent spate of activity, Omran noted, is a "very positive indicator that the Egyptian economy has started to recover". A stream of positive economic data has added to hopes of a budding recovery. The latest statistics from the HSBC Egypt Purchasing Managers' Index (PMI), an indicator of private sector (non-oil) health, showed a number of improvements in the business environment in September, including the first rise in staffing levels since mid-2012, and a sharp increase in output and new orders. Moreover, August headline PMI showed the biggest uptick in the year-to-date, bolstered by the sharpest increase in export orders since late 2011. September and August headline PMI came in at 52.4 and 51.6, respectively (readings above 50 indicate improving conditions). "Growth in new orders and employment shows us market sentiment is improving," Razan Nasser, a senior economist at HSBC, said in a statement released with the data. "Many challenges still lie ahead, but overall the numbers are encouraging, and we continue to expect growth to pick up pace through 2015." Egypt's economy is generally starting to show signs of acceleration. While growth in the first three quarters of FY 2013/14 amounted to a tepid 1.6%, down from 2.2% and 2.1% in FY 2011/12 and FY 2012/13, respectively, expectations going forward are higher. Minister of Finance, Hany Kadry Dimian, recently stated that growth in the fourth quarter of 2013/14 is expected to come in at 3.5%, which is also the government's forecast rate of growth for the current fiscal period, 2014/15. Moreover, Dimian noted that the government is targeting a 4-5.8% growth rate over the next three years. The stabilising political scene and the marked economic improvements have not gone unnoticed. Domestic investors grabbed $8.5bn of investment certificates for the recently announced Suez Canal mega project in just eight working days, a strong indication of confidence in the project and the economy in general. Moody's also took note of the improving conditions in its recent ratings action in late October, upgrading Egypt's outlook to "stable". This was followed by a similar upgrade on five of Egypt's largest banks. Moody's cited government initiatives and development programmes among the key drivers for the outlook improvement. This includes the government's fiscal consolidation efforts, which have targeted a 10% fiscal deficit in the current period (down from around 12% in FY 2013/14) and intentions to implement a value-added tax system. Coupled with this is the across-the-board fuel subsidies reduction in July. In the current fiscal budget energy subsidies amount to $14bn, down from an expected $20.8bn spent on fuel subsidies in FY 2013/14.
