Last year's 7.2% growth spurred by a shift in the country's trading strategy in the past years.
'We must not fall under 6%'
As the global slowdown threatens to hit the export and tourism sectors, the Egyptian government's challenge is make sure economic growth does not fall below 6 per cent, the country's trade and industry minister Rachid Mohamed Rachid said yesterday. "Last year our economic growth was 7.2 per cent and this year our goal is not to fall under 6 per cent. In order to do that we need to diversify our trade and take advantage of the opportunities in this situation," said Mr Rachid during a visit to Abu Dhabi to discuss the impact of the economic crisis and its effects on the region.
Egypt's non-oil exports reached US$14.88 billion (Dh54.65bn) in the year ending in June. "This was a growth of about 30 per cent from the year before and we are expecting this rate to slow down, but we still cannot determine to what extent," said Mr Rachid. Over the past four years Egypt has undergone a dramatic shift in trading strategy as markets in Asia have been explored. "Four years ago Europe and the US represented 90 per cent of our trade but right now its closer to 60 per cent, with the US representing less than 20 per cent. Europe is still our number one trading partner," said Mr Rachid.
At the height of the economic crisis, however, Egypt's trade and industry ministry is still committed to diversifying its trading partners. "I will be soon joining the Egyptian prime minister in Russia to further discuss the details of a free-trade agreement with the country," he said, adding that inter-regional trade represented about 20 per cent of total trade. Egypt's trade with Asia makes up about 15 per cent, and the minister said he expected that figure to surge this year.
Mr Rachid said that the ministry aimed to promote the private sector to develop the country's infrastructure as internal demand generated by a population of more than 75 million was one of the major ways to minimise the impact of the credit crunch. . Despite fears of a global recession, the minister said he was optimistic about the future, pointing out that opportunities for Egypt were starting to arise from the financial crisis.
"We are starting to notice the migration of industries from countries like Turkey, Italy and Spain into Egypt. Pressure on prices has made Egypt an attractive option as labour costs and energy are cheaper here," he said. "And these countries are now all competing with India and China, so cutting down their production costs is vital, in addition to the fact that Egypt has good proximity to Europe."
Another opportunity is the fact that Middle-Eastern businessmen are beginning to lose confidence in western markets, which could further drive inter-regional trade. "The risk equation is turning upside down. While investing in the US and Europe was once considered a safe bet and lower returns were once accepted from the region because of that, the events of the past few months has proved many people wrong," the minister said. "Right now, the risk equation has changed and we are starting to see more investment staying within the region."
On a positive note, Egypt's inflation, which had reached a 16-year high of 23.6 per cent, fell to 20.2 per cent in the year to October, government statistics agency Capmas said yesterday. "Inflation will continue to ease as the international prices of commodities drop," Mr Rachid said. Asked whether he thought there should be an interest-rate cut, he said: "I think there is growing pressure for the central bank to cut interest rates, I think it will happen within the coming few weeks."
Earlier this year the Central Bank of Egypt raised interest rates six times as a result of the massive surge in inflation. firstname.lastname@example.org