Egypt minister sees growth rebounding to 9 pct

Egypt's economic growth rate could rebound to between 7 and 9 percent after the global economic crisis, local media on Tuesday quoted the country's finance minister as saying, even as the Arab world's most populous nation braced for what analysts predicted would be a steep fall in revenues in vital sectors like tourism.

Youssef Boutros-Ghali also said that based on consumption indicators and government policies to boost growth, he believes Egypt will be able to weather the current economic slump, the semiofficial Al-Ahram and Al-Akhbar newspapers reported.

The minister gave no timeframe as to when he expected the growth rate to rebound or the global crisis to end.

Boutros-Ghali's remarks, made at a conference on Monday, reflected another show of optimism by the government in a country that has over the past couple of years seen its reform program help propel gross domestic product growth to slightly over 7 percent.

Even so, Egypt faces daunting challenges, with about 20 percent of its 78 million residents living below the poverty line of $2 per day, according to the World Bank.

The global meltdown has already pushed economic growth down to 4.1 percent in the second quarter of fiscal 2008-2009, and is expected to squeeze key sectors like the Suez Canal and tourism.

Many Egyptians worry that drop will only deepen after a French teen was killed in a bombing Sunday night at a Cairo tourist hotspot. The attack was the first targeting tourists in the country in three years.

Despite the mixed economic news, analysts share the government's optimism, even as they continue to revise down growth estimates for the current fiscal year.

"While we expect growth to dip in the short term due to the drop in private domestic and external consumption, we believe the country will be able to rebound from the low growth levels as soon as the global economy shows signs of a recovery," analysts at Cairo-based Mideast investment bank Beltone Financial said in a research note Monday.

"We expect that the government will continue to increase its spending in the economy until private consumption growth picks, especially as its previous fiscal reforms allow it to expand its spending, without a major deterioration in the budget deficit and debt profile," said the report.

Analysts argue the Egyptian government's $2.7 billion stimulus plan could help the country weather the crisis, especially as Egypt does not face the same kinds of liquidity issues that have battered other nations.

But the drop in growth, which some say could fall as low as 3.5 percent in the current fiscal year, seems tied in large part to a decline in tourism, Suez Canal revenues, worker remittances and foreign direct investment - the country's four largest foreign revenue sources.

Tourism, in particular, could face tough times as travelers increasingly opt to either stay home or take budget trips because of their own financial woes.

The attack Sunday, which also wounded 24 others at a plaza fronting the 650-year-old Khan el-Khalili bazaar, raised concerns among many Egyptians that it would accelerate the decline in travelers.

Analysts, however, have downplayed that prospect, saying that the impact would be short-lived, especially compared to how the global crisis will affect a sector that brought in $10.8 billion in fiscal 2007-2008.

Beltone said it does not "expect a significant drop in tourism beyond the levels which would prevail due to the global crisis," arguing that it happened at what is typically considered a tourism low season in Egypt and because there "is more tolerance of security related incidents worldwide."

"Had the incident occurred at a time when there was a boom in tourism arrivals, we believe that there could have been a bigger impact," the report said.