Egypt PM sees turnaround, seeks 7% growth

EGYPTIAN ECONOMY: Prime Minister says the worst effects of the global financial crisis appear to have passed. (Getty Images)

Egypt's prime minister said on Tuesday he aimed to get annual economic growth back above 7 percent within two years but this would depend on a recovery in foreign investment and other external factors.

Prime Minister Ahmed Nazif also told the Reuters Middle East Investment Summit that there were signs the worst effects of the world financial crisis had passed.

"We feel that the whole crisis is bottoming ... We have seen indicators in tourism, in the Suez Canal and otherwise to show that the last few months there is - although a small but very distinct - change of direction in all indicators," he said.

Egypt's economy slowed to 4.7 percent in 2008/09 after record growth above 7 percent immediately before the crisis. The downturn hit the most populous Arab country's main revenue earners, such as tourism and the Suez Canal.

The prime minister said growth would be about 5 percent in this financial year, a figure that is higher than some forecasts. Egyptian investment bank EFG-Hermes estimates growth will be 4.5 percent in 2009/10, rising to 5.6 percent next year.

"We need to get back to the level that we were growing at, 7 percent plus," Nazif said. "Hopefully we can get back to those numbers in the next year or two."

But he said much would depend on the country's ability to attract foreign direct investment.

"We can't grow to 7 percent depending on our own local, indigenous capacity alone. We need to be able to attract investments from abroad," he said.

Nazif said foreign direct investment fell to about $8 billion a year as a result of the crisis - a level which was still better than expected.

"We think that we can maintain the average of the last four to five years, which has been about $10 billion a year," he said, adding the focus was on attracting "greenfield" investments rather than selling government assets.

He said the government wanted to promote public-private partnership projects, including infrastructure initiatives.

A water sewage treatment plant deal has already been awarded and other plans include developing transport on the Nile.

Asked if he planned to revive plans to sell Banque du Caire - a sale that was shelved in 2008 - the prime minister said: "We are not in a hurry right now. There is no reason in market conditions that exist today."

The government's own stimulus package would push the budget deficit to 9-10 percent of gross domestic product in 2009/10, compared to 6.9 percent in the last financial year, Nazif said.

"The decision was that we need to spend more to keep the economy vibrant and growing," he said. "The target was to get to 3 percent in 2012. What we will see is that this target will have to move about two years."

Egypt spent almost 15 billion Egyptian pounds ($2.75 billion) to boost the economy in the first half of 2009, and has a second stimulus package in the works worth 10 billion pounds, of which some 4 billion pounds had been spent, Nazif said.

He said the government could live with core inflation of 6.3 percent "for a while". The more closely followed consumer inflation figure for urban areas is now around 11 percent.

"Growth is very important to us and we don't want to take any actions that would curb growth in any way," he said. (Reuters)

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