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It is estimated that GDP needs to rise by 7 per cent annually to create enough jobs to curb the rise in unemployment. Nasser Nasser / AP Photo
It is estimated that GDP needs to rise by 7 per cent annually to create enough jobs to curb the rise in unemployment. Nasser Nasser / AP Photo

Egyptian growth held in check by protests and strikes

Egypt's economy hardly grew in the three months to the end of September last year as persistent protests and strikes hurt activity across industry, construction and tourism sectors.

Egypt's economy hardly grew in the three months to the end of September last year as persistent protests and strikes hurt output.

Slower activity across industry, construction and tourism meant GDP expanded at just 0.2 per cent in that period in comparison with the same period in 2010, Magdy Emam, the head of the planning ministry's infrastructure division, was quoted by Egyptian media as telling a parliamentary committee.

"Before the revolution GDP growth was strong, but people were unhappy as the benefits were not being shared equally," said Jean-Michel Saliba, the Middle East and North Africa economist at Bank of America Merrill Lynch. "Now the overall size of the pie is smaller, which compounds the problem." Egypt's economy has been beset by protests and labour strikes since the overthrow of Hosni Mubarak as president in February last year.

Egypt's growth rate for the 2010-2011 financial year reached 1.9 per cent, Mr Emam was reported as telling the parliamentary committee on Monday.

During the three months to the end of September, industrial activity fell by 3.3 per cent compared with the same period in 2010, construction by 2.8 per cent and tourism by 10.4 per cent.

Growth in the Suez Canal rose by 8.2 per cent, communications by 3.7 per cent and public utilities by 5.2 per cent.

Combined with unrest, slower growth increases the challenges facing Egypt as it seeks to attract foreign direct investment, create jobs and replenish the government's finances.

It is estimated that GDP needs to rise by 7 per cent annually to create enough jobs to curb the rise in unemployment.

With the decline in foreign investment and tourism, the central bank's reserves shrank by US$1.77 billion (Dh6.5bn) to $16.35bn last month. Reserves are down by more than half since Mr Mubarak was forced from office.

The dip risks dragging down the value of Egypt's currency. The government is also grappling with a nearly 10 per cent budget deficit that is pushing up its financing costs.

In a reversal of an earlier decision, Egypt last month said it was seeking a $3.2bn loan from the IMF. It is hoped the move may encourage other possible foreign investors.

Egypt's economy is not tipped to rebound this year, with Bank of America Merrill Lynch estimating growth of only 1.5 per cent.

The IMF warned this month that maintaining economic and social stability was "challenging" because short-term growth prospects remained modest.

tarnold@thenational.ae

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