Egypt sees 'glimmer of hope'
Cairo, May 27, 2009
April receipts from two of Egypt's main sources of revenue -- tourism and the Suez Canal -- provide a "glimmer of hope" that the economic downturn could be finding a floor, the country's central bank governor said on Wednesday.
Tourism revenues were down only 1.8 percent year-on-year in April, while returns from the Suez Canal had edged up in April on the previous month, governor Farouk el-Okdah said, adding that he saw a "glimmer of hope".
"Maybe we are bottoming," the governor told a news conference.
Economists have been watching Suez Canal revenues closely to see any effects from piracy off the Somali coast and the recession in major economies, which is expected to reduce the volume of trade between Asia and Europe.
The Suez Canal Authority said this month that revenues from the waterway dropped 22.7 percent to $346.9 million in April year-on-year but were up from $327.9 million in March.
The governor also said Egypt's inflation rate in June was expected to be about 10 percent, continuing a steady decline since it peaked in August 2008 at around 23.6 percent.
The central bank said on May 15 that headline inflation fell in April to 11.7 percent from 12.1 percent in March, but that the sharp drop in international commodity prices was not yet reflected in domestic prices due to "downward price rigidities".
Analysts say Egypt's financial system is flush with cash helping the Arab world's most populous nation ride out a global crunch in credit. But the downturn in the world economy has hurt key earners such as tourism, Suez Canal receipts, oil and gas export revenues and remittances from workers.
The government said the Egyptian economy had grown at an annualised rate of 4.3 percent in the three months to end-March, from 4.1 percent in the previous quarter.
However, the investment bank EFG-Hermes said in a note that the surprisingly strong first quarter growth rate could not be sustained, partly because rising unemployment and weak external demand would weigh on private consumption.
The central bank cut its overnight deposit rate by 50 basis points to 9.5 percent and its overnight lending rate by 100 basis points to 11 percent on May 15, a move analysts said was to boost lending by Egypt's relatively conservative banks. - Reuters