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Egypt Business Forecast Report Q4 2008Published by: Business Monitor International Published: Jul. 28, 2008 - 55 Pages Table of Contents
AbstractStormy Times, But All Storms PassAgainst a backdrop of worsening global financial market turmoil and rapidly accelerating inflation,particularly in emerging markets, Egypt is not alone in having significantly more clouds onthe horizon than it did this time last year. Over the last six months, we have revised our politicalrisk ratings, growth forecasts and budget deficit forecasts down, and raised inflation and interestrate projections. We are also less confident in the government’s commitment to the reformprocess than we were even in our last Business Forecast Report. However, there are still manypoints in Egypt’s favour. Its exposure to the liquidity story in the Gulf is key to a resilient economicoutlook, as are its credible central bank and current account surplus. We think it can ride out thepresent storm. Politically, Egypt’s challenges are both long- and short-term in nature. The pressure is on now,undoubtedly, with public dissatisfaction over inflation, healthcare, education and foreign policy rising.However, the fundamental problems - poverty and lack of genuine democratic representation - willpersist over the coming years. We think the government will hold on for now, with a combinationof carrot and stick policies for those protesting. However, in the longer term, job creation will beessential if it is to maintain stability. On the economic side, higher inflation, higher interest rates, the cancellation of the Banque duCaire (BdC) privatisation and a continuing stock market correction all suggest downside risks.However, while Egypt’s inflation may be higher than that of other states, its growth momentum isalso stronger, and it is one of the more resilient economies in the emerging markets in our view. Wehad anticipated a slowdown to 6.1% in 2009, and we have adjusted this only slightly to 5.8%. There has been a distinct deterioration in the outlook for the business environment. We had,until recently, been citing the sell-off of BdC as a reason to stay positive on the Egyptian reformstory. However, the deal was postponed on June 25, after the authorities deemed the winning bid(Greece’s National Bank, with an offer valuing the bank at US$2.025bn, or 4.1 times book value)too low. This, alongside the bad news on the Agrium deal, the downturn in the stock market anda number of other developments, suggests that investor confidence could falter. Get Full Details About This Report >> |
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