The Sunday macro-economy rundown: Oct 20

Prime Minister Hazem al-Beblawi has told the Saudi Gazette that Egypt’s economy is improving, adding that remittances have been increasing, as has Saudi, Kuwaiti and Emirati support to the country.

Beblawi’s comments came in response to recent IMF reports stating that the performance of the Egyptian economy will remain weak till 2018. In contrast, Beblawi said that Egypt can resolve its economic problems quickly as conditions normalize alongside political stability and security.

Interim finance minister, Ahmed Galal, said that Egypt does not need the IMF loan because it no longer needs to attract the funds and confidence of the international investment community.

Egypt has been in negotiations with the IMF over the US$4.8 billion loan for two years now with little progress, mainly because of successive governments’ reluctance to impose harsh reforms, such as lifting fuel subsidies and raising taxes.

Nile TV quoted the finance minister as saying that three delegations from the World Bank had visited Cairo since June 30, including one headed by the World Bank’s chief economist. The delegation discussed ways to cooperate  with Egypt and support its economy.

Minister of Planning Ashraf al-Arabi said the IMF’s reporting on Egypt’s economy was based on estimates on the situation prior to June 30.

Economic plans

Arabi said the government would provide additional credit facilities of around LE24.5 billion, more than 1 percent of GDP. The initiative, intended to stimulate the national economy, will give priority to programs that are labor intensive, MENA reported.

The minister of planning said that targeted investments for this fiscal year amount to LE290 billion, divided between LE120 billion for public investments and LE170 billion for private investments.

Arabi added that the government is targeting economic growth of 3.5 percent for the current year, compared to an average of 2 percent over the past three years. He stressed the need for a genuine improvement in general living standards.

The minister denied allegations that he said the economy is in “perfect condition.” He clarified that initial indicators of this year’s first quarter, from July to September, show signs of recovery when compared to the period before June 30, but that it still faces many challenges, mainly in terms of creating a investor-friendly environment.

Economic milestones

Egypt’s economy grew by 2.1 percent by June, the 2013 year-end, compared to 2.2 percent in the previous year.

Nevertheless, Beblawi seemed optimistic. He cited the recent boom in the Egyptian stock exchange, a return of tourism, an improvement in the exchange rate of the Egyptian pound, and an increase of foreign exchange reserves.

• Egypt’s stock exchange was in the green on Sunday, after prices rose across the board amid positive news on the Egyptian economy, political stability, and the international situation due to the resolution of the US debt ceiling issue. The main indicator, EGX30, rose by 1.04 percent to cross a strong resistance at 6,049.
• Recent CAPMAS figures revealed that tourism in August was down by 45 percent on the year before, to 564,000 tourists. However, a dozen countries lifted their travel alert on Egypt in early October.
• The Egyptian pound has been gaining ground since early July, after peaking at 7 pounds to the dollar. Over the past week the rate has been hovering between a low of 6.78 and a high of 6.87 to the dollar.  Beblawi said the Egypt is no longer suffering from a foreign exchange crisis.
• The Central Bank of Egypt stated that net international reserves reached US$18.7 billion at the end of September 2013, compared to $18.9 billion in August. Foreign reserves rose by almost $4 billion in July through funds provided by Gulf countries after President Mohamed Morsi’s ouster on July 3.