NEW YORK: Economic growth in Egypt is expected to decline to the 3.5 to 4 percent range in the upcoming fiscal year, Investment Minister Mahmoud Mohieldin told Reuters in an interview on Friday. Growth in economic activity for Egypt would stand in contrast to much of the rest of the world where the global recession is cutting into output at a rapid pace. Mohieldin said growth was based upon still strong housing, infrastructure and agricultural sectors, plus dropping inflation rates. A big help for the housing and infrastructure sectors has been declining costs for building materials due to the global economic slump which is lowering commodity prices. Now we are using more conservative (GDP) estimates and projections, so ranging between 3.5 and 4 percent. But we are going to be introducing a package, currently, targeting 5 percent growth, Mohieldin said, without elaborating on the details. In these days you target whatever, but it is better to work on the conservative scenario, he said. Among the hardest hit sectors will be manufacturing due to its orientation toward exports, he said. Infrastructure makes up 26 percent of gross domestic product while nonpetroleum manufacturing accounts for 12 percent of GDP, according to Ministry of Economic Development data. Real estate and construction is 5 percent of GDP. Earlier this week, Egyptian Finance Minister Youssef Boutros-Ghali said he expected the economy to grow between 4 to 4.5 percent in the 2008/2009 fiscal year, which began July 1, from 7.2 percent a year earlier. On Thursday the International Monetary Fund said the world economy will contract in 2009 for the first time since World War Two by between 0.5 percent and 1.0 percent. Emerging markets, the IMF said, would see growth slow to 1.5 to 2.5 percent in 2009 and reach 3.5 to 4.5 percent in 2010. Falling inflation Falling economic output and declining commodity prices are helping reduce inflation in Egypt. Inflation eased to 13.5 percent in the year to February, according to the latest government data. It is expected to be single digits in the forthcoming weeks and months. It is very, very likely that for the whole year, next year, it is going to be single digits, Mohieldin said. He would not give a target for inflation, citing the government s lack of a finalized framework for it. However, on the budget deficit, the government will target no more than 9 percent in the upcoming fiscal year, Mohieldin said. He said the government does not foresee a need to tap international markets for financing, adding market conditions would need to improve before it considers a debt issue. Foreign direct investment (FDI) will also decline as a result of the worldwide economic troubles. According to Central Bank of Egypt figures, FDI in the first half of the current fiscal year was $4.27 billion. It is very hard to annualize FDI figures. But, well, if we are keeping pace as it happened in the first half we could be around $8 billion. Not bad, he said.
