Investment programme in Egypt to lift growth to 5% yearly

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Barclays Capital projected Egypt’s real Gross Domestic Product (GDP) growth at 3.7 per cent in the fiscal year (FY) 2014/15, which ends in June 2015, compared to a growth rate of 2.2 per cent in FY2013/14, supported by the government’s investment recovery programme.

It said that authorities launched several initiatives that include the $4 billion Suez Canal Corridor Development project, which aims to increase the canal’s annual revenue from $5.1 billion currently to $13.5 billion.

Barclays pointed out that other national investment projects are under way, including the Golden Triangle development project in Upper Egypt and the North West Coast development plan, which aim to exploit the country’s natural resources and mineral wealth.

It added that the government would launch a public-private partnership programme to address the country’s infrastructure needs, with expectations to tender one project per month, over the remainder of 2014 and about six to seven projects in 2015.

It anticipated that these investments would accelerate the annual real GDP growth to about 4-5 per cent over the next three years.

Further, it projected the fiscal deficit to narrow from 11.7 per cent of GDP in FY2013/14 to 11 per cent of GDP in FY2014/15, reflecting the implementation of fiscal reforms in July 2014.

It noted that the Central Bank of Egypt could increase policy rates in the fourth quarter of 2014 following the unexpected 100 basis points rise in June 2014.

Barclays indicated that Egypt’s external and fiscal positions remain fragile, and anticipated that they will both remain reliant on funding from Gulf countries in the short-tern.

It forecast the current account deficit at 1.7 per cent of GDP in FY2014/15, compared to a deficit of 0.8 per cent of GDP a year earlier.

Barclays added that the Gulf Cooperation Council aid would help maintain the country’s foreign currency reserves at almost their current levels and would further reduce the stock of short-term external debt by the end of 2014.

It noted that authorities estimated the country’s external financing needs at about $12 billion in 2015.