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Egypt's economy to grow at 4pc, lower than expected

CAIRO, October 19, 2015

Egypt's economy is set to grow at a steady pace of 4.3 per cent this financial year and the following two years, only marginally higher than the previous year and short of the government's growth expectations, a Reuters poll showed on Monday.

Egypt has been struggling to revive its economy since a 2011 uprising toppled autocrat Hosni Mubarak, causing political and economic turmoil that deterred foreign investors and tourists and put a strain on the country's foreign reserves.

Foreign reserves fell from $36 billion in 2011 down to $16.3 billion in September, enough to cover just over three months worth of imports.

The government said the economy grew around 4.2 per cent last year and its 2015/2016 budget projects growth of 5 per cent for the financial year ending June 30.

A previous Reuters poll, published on August 20, showed analysts expected Egypt to grow by 4.3 per cent in the year ending June 2016, and forecasted a growth of 4.5 per cent and 5 per cent in the following two years.

The central bank has been trying to balance the need for economic growth while keeping inflation risks at bay. It has kept its key interest rates unchanged for five consecutive central bank policy meetings.

Analysts polled by Reuters expect the central bank to lower its overnight lending rate to nine per cent this year, from the current rate of 9.75 per cent. They expect the rate to be raised the following year to 9.25 per cent and remain steady the following year.

Before the 2011 uprising, the economy grew about 7 per cent annually for several years, but even that pace was barely enough to produce work for the large number of Egyptian youths entering the job market.

Egyptians voted on Monday in what one newspaper called a parliamentary "election without voters", the low turnout highlighting growing disillusionment since the army seized power in 2013 and promised to restore democracy and growth. Younger Egyptians, who make up the majority of the population, were virtually absent.

Inflation rates in Egypt had been easing before September, reaching their lowest levels in more than two years in August and raising speculation that the central bank would cut rates to stimulate investments.

Urban consumer inflation however jumped to 9.2 per cent in September from 7.9 per cent in August on higher food prices while core inflation, which excludes items such as fruit and vegetables, continued its drop to 5.55 per cent in September from 5.61 per cent in August.

Analysts polled by Reuters lowered their inflation forecast to 10.1 per cent for the financial year ending June 2016 from 10.4 per cent in the previous poll. They expect it to ease further by June 2017 to 9.5 per cent before it rises again to 10.4 per cent the following year.

Finance Minister Hany Kadry Dimian said on Monday Egypt would delay its second international bond issuance, initially planned for November, due to "turbulence in the Chinese financial market that had a negative effect on liquidity in the global markets in general."-Reuters




Tags: Egypt | economy |

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