Tuesday, Sep 29, 2009

(This item was originally published Monday.)

By Tim Falconer and Shereen El Gazzar

Of ZAWYA DOW JONES

CAIRO (Zawya Dow Jones)--Egypt, the Arab world's most populous country, will emerge from the global economic slowdown relatively unscathed but rising unemployment and sagging revenues from tourism and the Suez Canal are weighing on prospects for growth.

The Egyptian stock market, with a market capitalization of about $95 billion, has outperformed the oil-rich Gulf Cooperation Council's bourses by a wide margin this year, up more than 52% to date. Saudi Arabia's Tadawul, the largest market in the region, in comparison has added about 28% in the same period.

"Egypt has one of the most robust economies in the region, buoyed by the largest population," said Faisal Ghori, principal at Middle East Ventures based in Washington D.C. "This over the years has translated into a real and meaningful economy, driven by real consumer demand."

But money managers and politicians converging on Cairo Tuesday for a key economic conference organized by Euromoney are still seeking answers about how Egypt plans to tackle unemployment given its swelling population, the threat of inflation and the need for more diversified sources of revenue.

"The biggest challenges are a worsening budget deficit due to lower revenues and an ongoing stimulus," said Simon Kitchen, economist at Egyptian investment bank EFG-Hermes.

Unemployment in Egypt topped 9% in the first quarter of 2009. In May, the country said there were some 2.34 million people unemployed out of a workforce of 25 million.

Tourism, a major employer in the country, has been hit badly by the global economic slowdown as western travelers cut back holidays in a bid to save money. The industry continues to suffer despite the pickup in world economies.

Egypt's Tourism Minister Zoheir Garranah said in July the country's tourism revenue fell 9.5% in the first six months of 2009.

Revenue from the Suez Canal, a major conduit for oil shipments and global trade, has also been hit by the financial crisis. Revenues from the canal, which picked up in the past quarter, are down about 25% from a year ago.

Still business is relatively optimistic about future prospects in the country.

"Egypt has fared well through this recession. The economy was relatively unleveraged before the crisis, meaning that there was no sudden stop to credit flows that disrupted the economy," said EFG's Kitchen.

The economy grew 7.2% last year and analysts forecast a 4% to 5% expansion this year, which is impressive given the difficulties faced by other countries in the region and the fact that most Western economies are still contracting.

EGYPT MACROECONOMIC INDICATORS:

 
   Population:                  81.5 million (2008) 
 
   Inflation rate:              9% (Aug. 2009) 
 
   GDP Growth:                  4.3%  (Q1 2009) 
 
   Foreign Direct Investment:   $8.1 billion (2008-09) 
 
   Net International Reserves:  $32.91 billion (Aug. 2009) 
 
 

Sources: Central Bank of Egypt; Economist Intelligence Unit

-By Tim Falconer, Dow Jones Newswires, +971-4-384-4968 tim.falconer@dowjones.com

Copyright (c) 2009 Dow Jones & Co.

(END) Dow Jones Newswires

29-09-09 0420GMT