Egypt has largely avoided the negative fallout from the global financial crisis and economic recession, with real gross domestic product (GDP) in 2009 and early 2010 continuing to show strength, the National Bank of Kuwait has said a report. "Figures for the first quarter this year indicate a recovery is gathering momentum as a number of key indicators picked up and real GDP growth jumped to 5.8 per cent from 4.7 per cent in the fourth quarter of 2009," the report said. Egypt's economy expanded 5.8 per cent in the third quarter of the fiscal year that ended on June 30, from five per cent in the previous three months, Reuters quoted Economic Development Minister Osman Mohamed Osman as saying in May. Tourism revenues moved higher for the second consecutive quarter, while non-hydrocarbon exports and imports both saw double digit growth in the quarter compared to a year ago, the NBK said in its report. Despite the positive picture, some risks remain. Inflation is high and reforms are still needed to reduce the structural deficit. Parliamentary elections later in 2010 and presidential elections in 2011 also present heightened political uncertainty, it said. "Nonetheless, these risks are limited and are unlikely to derail the economic recovery. Economic recovery will be gradual. While the impact of the crisis on Egypt's economy was muted, the recovery is expected to be gradual and growth is unlikely to return to pre-crisis levels," it said. The Government says it needs a growth rate of about seven per cent to create enough jobs for the 750,000 people who enter the workforce every year. Unemployment is nine per cent, according to the State-run Central Agency for Public Mobilisation and Statistics (CAPMAS). The NBK expects a pick up to 5.2 per cent in this fiscal year and 5.5 per cent in the fiscal year 2010/11. "During the global economic slowdown, the Egyptian economy was mainly impacted through five key channels: lower exports (mostly oil), tourism revenues, remittances from Egyptians working abroad, Suez Canal receipts, and foreign direct investment (FDI) flows," it said. The Government responded to the slowdown with two stimulus packages in December 2008 and in March 2009, which included capital expenditures, export subsidies, and tariff exemptions for capital goods. "The packages injected a total of $5.4 billion, equivalent to 2.9 per cent of GDP, to prop up economic activity. The move undoubtedly helped reduce the impact of the global slowdown on the domestic economy," it said. The Government also postponed a number of fiscal reforms expected to have a contractionary affect on the economy including the introduction of a property tax, widening the scope of the value-added tax and the continued phasing out of energy subsidies," it added. Egypt's budget deficit beat the Government's target for the fiscal year through June after tax returns increased, Minister of Finance Youssef Boutros-Ghali said this month. Initial figures show that the shortfall widened to less than 8.3 per cent of GDP, below the Government's target of 8.4 per cent. The deficit was 6.9 per cent in the previous year. Egypt's tax revenue for the fiscal year through June rose to LE148 billion ($26 billion), a six per cent increase on the previous year.
