x Abu Dhabi, UAEWednesday 26 July 2017

Egypt mulls stimulus to spur jobs and growth

Egypt could implement a stimulus package to create jobs, the country's finance minister has said

Egypt is weighing the implementation of an economic package to stimulate growth and create jobs, says the country's finance minister.

As the Egyptian Stock Exchange delayed the opening of the market until Wednesday, Samir Radwan was quick to reassure international investors yesterday of the country's growth prospects.

"There is a need for a stimulus package that is very closely related to employment."

He added that the Egyptian army was overseeing the smooth transition of control after protracted political turmoil that culminated on Friday in the resignation of Hosni Mubarak as president.

"The armed forces are there to protect the demonstrators and to protect the country but the powers have been handed over," he said.

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Analysts expect the army's high council to keep present government ministers in office, apart from one or two who have provoked public anger.

"A stimulus package is likely and I'd also say that most of the administration is going to be the same," said Mohammed Seddiek, the head of research at Prime Securities in Cairo.

Economists say a stimulus package will be crucial in replacing growth that has been lost because of the political crisis. That could come from three areas: the government sale of more debt; a loan from the IMF; or by redirecting spending in the economy.

"Selling additional government bonds would exacerbate further the country's stretched public finances," said John Sfakianakis, the chief economist at Banque Saudi Fransi.

He expects the budget deficit to peak above 10 per cent of GDP this year, higher than Mr Radwan's previous estimate of 7.9 per cent.

The finance minister's comments came just hours before the Egyptian Stock Exchange delayed plans to open the market today.

Having received calls from 50 investors pleading to postpone trading, the exchange said it would now open on Wednesday.

The market fell 16 per cent in the two days running up to its close on January 30.

When it reopens, trading hours are expected to be reduced from four hours to three, with a number of exceptional measures put in place to support liquidity.

"The Egyptian market is the most advanced in the Arab world," said Mohammed Ali Yasin, the chief investment office at CAPM Investments in Abu Dhabi. "They will have a number of mechanisms to limit a fall," he said.

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The exchange will suspend trading for 30 minutes if the market falls by 5 per cent and will implement further measures if the stock falls again.

It has also suspended same-day trading and individual companies will not be allowed to fall more than 20 per cent in value.

Alfred Fayek, the head of Mena Equity sales at EFG-Hermes, based in Cairo, said Egyptians were being encouraged to support the market.

But he said he did not think they would immediately transfer money they held in the UAE. "That's not a risk," he said.

International investors are expected to move money out of Egypt after its sovereign rating was downgraded by credit agencies, Mr Fayek said.

But initial indications were that investors are less concerned about the political crisis than feared.

 

rjones@thenational.ae