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FEDERATION OF EURO-ASIAN STOCK EXCHANGES SEMI ANNUAL REPORT MAY 2005
CAIRO & ALEXANDRIA STOCK EXCHANGES
ECONOMIC AND POLITICAL DEVELOPMENTS
Politic and Economic Environment:
Strengthening macroeconomic indicators in
recent years provided grounds 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 sectoral diversification is impressive.
Agriculture still accounts for about 17% of
GDP. The principal export crops are cotton
and winter vegetables. A substantial
industrial sector has benefited from synergy
between investment from Persian Gulf oilproducing
countries and Egypt's own
abundant labor. Egypt is the Arab world's
dominant manufacturer of raw and fabricated
metals, vehicles, and pharmaceuticals. The
near and medium-term industrial outlook
appears favorable.
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 68
Egypt
Lower-middle-income group
Trade
Indebtedness
Investment
A new government was appointed in July
2004, headed by Dr. Ahmed Nazif, with a
clear goal to revive the economy. To that
end, the new government has formulated a
package of structural and financial reforms.
These include: a streamline in tariff brackets
to only six brackets (down from a previous 27)
and an overhaul of customs procedures with
a reduction in tariff rates from 14.6% to 9.1%,
a newly proposed income tax law, where rate
of income tax will be slashed to 20% down
from a previous 40%. The corporate tax will
be reduced and unified at 20%, the revival
and the speeding up of the privatization
program, the government presented a
medium-term financial sector restructure
program covering banking and non-banking
sectors with the aim to improve efficiency
and reduce costs.
In December 2004, Egypt signed the
Qualified Industrial Zone Protocol (QIZ),
which is expected to have sustained impacts
on export growth and trade efficiency as well
as stimulate foreign investment in Egypt. On
19 December 2004, Fitch Credit Rating
revised their outlook of Egypt long term
currency rating of “BBB” from negative to
stable.
GROWTH OF INVESTMENT AND GDP
(%)
20
15
10
5
0
-5
97
GDI GDP
Economic Performance:
Egypt's recent economic indicators reflect
robust signs of an upturn in the Egyptian
Economy. 2003/04 real growth recorded
4.4% up from 3.2% in the previous year.
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.
Preliminary estimates during the first quarter
of FY 2004/2005 projects an annualized rate
of 4.8% and maybe surpassing the 5% at the
end of the year.
The FY 2003/04 current account revealed a
large surplus of US$ 3.7 billion compared to
US$ 1.9 billion in the previous year. This was
mainly attributed to the success in non-oil
exports promotion (with exports of good and
services growing by 6%) and a surge in
tourism revenues. Foreign Reserves reached
a five year high of US$ 16.6 billion at the end
of January 2005, which covers almost 10
months of imports. Last, but not the least,
the Egyptian pound has strengthened 7%
vis a vis the US Dollar, coming on the back
of a strong current account surplus and the
launch of the US$ Interbank market which
resulted in increased availability of foreign
exchange.
On the other hand, Egypt's foreign debt
position remains strong and sustainable.
Despite an increase in Egypt’s foreign debt
to US$ 29.5 billion in the first quarter of 2005,
it remains quite safe as it stands at less than
40% of the country’s GDP. Debt to GDP
stands at less than 40% of GDP.
98 99 00 01 02 03
* World Bank reports