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Egypt Business Forecast Report Q1 2010

Published by: Business Monitor International

Published: Oct. 30, 2009 - 62 Pages


Table of Contents


Executive Summary
Parliamentary Election Year: Political Risks Assessed
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
A Year Of Challenges: Election Prospects Assessed
Our core scenario is for the National Democratic Party to regain some of the Muslim Brotherhood’s seats in the 2010
elections.
Domestic Politics II
Political Challenges Ahead For The NDP
As the National Democratic Party prepares for its sixth annual conference on October 31, it continues to face multiple
challenges, in the form of unemployment, a slowing economy, and high levels of support for the Muslim Brotherhood
opposition.
TABLE: EGYPT POLITICAL OVERVIEW
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Government Driven Recovery Raises Concerns
The prospects for recovery are not as buoyant as headline figures suggest, but the domestic demand story in Egypt will
keep it appealing to investors for some years, as long as political stability holds.
table : ECONOMIC ACTIVITY
Exchange Rate Policy
Sound Fundamentals, Better Technicals
The pound continues to look good against the US dollar, with the medium-term uptrend still in place.
table : EXCHANGE RATE
External Debt
Government Debt To Peak
Public debt will peak in fiscal year FY09/10 (July 2009 to June 2010), as the government seeks to shore up growth
ahead of the election, but the private sector should take over the bulk of borrowing from there, ensuring the total
national debt continues to rise.
table : DEBT INDICATORS
Chapter 3: 10-Year Forecast
The Egyptian Economy T0 2019
Well Placed For Long-Term Growth
Egypt has a lot to look forward to, with many inherent advantages including its strategic and cultural position in the
world, a large and growing population and an underdeveloped private sector, providing ample room for expansion.
table : EGYPT Long-Term Macroeconomic Forecasts
Chapter 4: Special Report
The World’s Fiscal Conundrum
Bleeding Red Ink Across The Globe
Table: WORLD GOVERNMENT EXPENDITURE INDICATORS
Table: WORLD GOVERNMENT REVENUE INDICATORS
Table: WORLD FISCAL BALANCE INDICATORS
Chapter 5: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
Institutions
TABLE: BMI LEGAL FRAMEWORK RATINGS
Infrastructure
Market Orientation
table : MIDDLE EAST & AFRICA, ANNUAL FDI INFLOWS
TABLE: BMI TRADE RATINGS
Operational Risk
table : TOP EXPORT DESTINATIONS, US$MN
Chapter 6: Key Sectors
Autos
Executive Summary
BMI maintains its view that the market will undergo a short period of falling sales in the first half of 2009, with an
overall annual fall of perhaps up to 20% in some sectors of the autos market.
table : Egypt Autos Sector — Historical Data & Forecasts
Water
Executive Summary
The World Bank forecasts that Middle East per capita water availability will fall by half by 2050, to just 550m3/year.
Table: Egypt ’s Water Sector, 2007-2013
Chapter 7: BMI Global Assumptions
Global Assumptions
TABLE: GLOBAL ASSUMPTIONS
TABLE: GLOBAL & REGIONAL REAL GDP GROWTH

Abstract

The Egyptian government faces a very difficult time in 2010. Historically prominent issues suchas (a) the succession of President Mubarak, (b) the use of military courts, emergency rule andthe parliamentary electoral system, and (c) the country’s relations with Israel, Fatah and Hamasare all likely to come even further to the fore. In addition, with both parliamentary and presidentialelections approaching, Egypt will be crossing its fingers that the headline figures are enough toconvince the population of an economic recovery. We think there is a risk of a ‘double dip’, withconsumer spending numbers still looking very weak.

We think that new electoral legislation and the weakening of the Muslim Brotherhood (MB) overrecent years through arrests, imprisonment and asset freezing will allow the National DemocraticParty (NDP) to win back in parliamentary polls in 2010 some of the 88 seats it lost to the MB in2005. This done, it will likely try to move presidential polls forward, before the opposition gains toomuch momentum. Its candidate should win easily, but putting forward someone other than GamalMubarak would increase its chances and reduce the opposition’s momentum. Meanwhile if theopposition fields someone like Mohamed ElBaradei, then the government could be in trouble.

Most of the growth in the last quarter was driven by government spending, and while we expectthis to continue - 2010 is after all, an election year - we do not think the private sector is out of thewoods yet. The figures paint a very mixed picture, but a 41.5% decline in real imports in the April-June period - the latest for which data is currently available - does not suggest to us a particularlybuoyant recovery. That said, in terms of the fiscal and current account deficits, and the nationaldebt pile, 2009/10 should mark the bottom, with all three indicators set to improve from 2011/12.

T he development of the private sector has stalled, and in spite of the government apparently havingrevived privatisation plans, the public sector looks set to maintain a strong role in the economy forsome time to come. Banks are still exercising caution amid the current economic conditions, andthe fact that it is an election year suggests that the government will maintain its historical fiscalprofligacy. Against this backdrop, the ‘safe haven’ public sector will continue to dominate commercialbank lending for some time. In turn this could crowd out the private sector, increasing thecost of borrowing and reducing the chances of a recovery. Banks elsewhere in the MENA regionare still lending very cautiously, and we think this will continue into Q110 at least.

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