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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT OCTOBER 2005
CAIRO & ALEXANDRIA STOCK EXCHANGES
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
Strengthening macroeconomic indicators in
recent years provide ground for optimism
that the reform process has paved the way
for a period of more rapid modernization and
solid economic growth. Economic reforms
have come within the past decade under
President Hosni Mubarak. Key elements of
the reform program are: structural
adjustment financing through the IMF-World
Bank, strong policy action to curb fiscal
deficits and inflation, tax and policy changes,
including large-scale privatization of state
industries, opening the economy to private
(including foreign) investment, and pursuit of
funding from a flexible range of sources to
expedite needed development. A
combination of bilateral and private moneyvariously
channeled as loans, grants, and
incentivized investment-has been committed
to numerous infrastructure projects.
Egypt’s latest economic indicators reflect
robust signs of an accelerating economic
upturn. These development mainly came as
a result of the aggressive reform program
undertaken by the new government
appointed in July 2004, including a
comprehensive package of economic,
structural and political reform, with long term
impact.
Moreover, in December 2004, Egypt signed
the Qualified Industrial Zone Protocol (QIZ),
which is expected to have sustained impacts
on exports growth and trade efficiency as
well as stimulate foreign investment in Egypt.
The protocol is the first step towards the
Key Information Contacts
Central Bank of Egypt www.cbe.org.eg
Capital Market Authority www.cma.gov.eg
Misr Settlement, Clearance and Depository www.mcsd.com.eg
Ministry of Finance www.mof.gov.eg
Ministry of Investment www.investment.gov.eg
ECONOMIC RATIOS
Domestic
savings
PAGE 72
Egypt
Lower-middle-income group
Trade
Indebtedness
Investment
establishment of a free trade agreement
(FTA) with the United States.
On 15 March 2005, Standard and Poor’s
revised Egypt’s outlook from negative to
stable while Fitch Ratings had already
reviewed Egypt’s outlook to stable in
December 2004.
The rising confidence in the government
reform measures, has positively effected the
flow of foreign investment to Egypt. Foreign
direct investment (FDI) registered almost
US$ 1 billion during the first quarter of 2005,
which is 1.5 times the FDI generated in FY
2003/2004 and has reached more than US$
1.8 billion over the period (July 2004-March
2005). This was primarily driven by the
aggressive measures undertaken by the
Ministry of Investment and the General
Authority for Investment and Free Zones
(GAFI) to promote Egypt as an investorfriendly
and international competitive
destination.
Likewise, privatization proceeds have surged
during the first half of 2005 recording LE 5.7
billion, which is three times the proceeds
achieved during the last three years. Foreign
investment constituted 53% of those
proceeds.
From another perspective, there was a
substantial level of banking sector
consolidation either through mergers or
acquisitions to strengthen the banks’
financial standing and creditworthiness and
increase their competitiveness in the global
arena.
GROWTH OF INVESTMENT AND GDP
(%)
20
15
10
5
0
-5
97
GDI GDP
Economic Performance:
Economic growth has picked up to 5.2%
during the first quarter of 2005 with
expectations of a faster growth in the
following years. The economic recovery was
helped by the stability in currency prices, the
growth in exports of goods and services as
well as the increased confidence in the new
Cabinet.
The current account revealed a large surplus
of US$ 883 million in the first quarter of 2005;
a significant increase of 60% over the same
comparable period of last year, to come in at
US$ 3.5 million surplus over the period (July
2004-March 2005). This was mainly
attributed to the 12% leap in tourism
revenues as well as the 17% surge in exports
– thanks to the non petroleum exports rather
than the petroleum exports as it was
expected due to the pick up in international
oil prices.
Foreign reserves hiked to US$ 20.48 billion
as of July 2005, for the first time since 1997.
Last, but not the least, the Egyptian pound
has strengthened 8% vis a vis the US Dollar
during the first half of 2005, coming on the
back of a strong current account surplus.
On the other hand, Egypt's foreign debt
position remains strong and sustainable.
Despite an increase in Egypt’s foreign debt
to US$ 30.2 billion at the end of March 2005,
it remains quite safe as it stands at less than
40% of the country’s GDP.
98 99 00 01 02 03
* World Bank reports