Egypt Economy Slows as Turmoil Takes Toll
Egypt’s economic growth slowed in the first quarter of the fiscal year as the nation’s worst political crisis in at least three decades eroded income from tourism, manufacturing and construction.
Gross domestic product expanded 0.2 percent in the three months that ended Sept. 30, compared with growth of 0.4 percent in the previous three months, according to data released by the Ministry of Planning.
“This is far below our expectations,” Alia Mamdouh, an economist at Cairo-based investment bank CI Capital, said in a telephone interview. She had forecast a growth of 0.8 percent.
The turmoil that followed the ouster of President Hosni Mubarak in February prompted tourists to stay away and brought foreign direct investment down 93 percent in the first nine months of the year to $376 million, according to central bank data. Egypt’s foreign currency reserves tumbled 44 percent in the first 11 months to $20.2 billion.
Continued depletion of the reserves “will have serious negative consequences,” the ministry said in the report.
Tourism contracted 10.4 percent and manufacturing shrank 3.3 percent, the ministry said. Construction, which grew 0.3 percent in the last quarter of the previous fiscal year, shrank 2.8 percent.
Total investments declined 18 percent to 46 billion pounds ($7.6 billion), according to the report. Revenue from the Suez Canal climbed 8.4 percent and telecommunications expanded 3.7 percent, the data show.
The crisis has sent government borrowing costs to a record high after foreign investors cutting their holdings of treasury bills by $7.5 billion in the first nine months of 2011, compared with net purchases of $8.6 billion in the same period a year earlier, central bank data show.
The Ministry of Finance raised 4 billion pounds in treasury bills today, missing its target by 1.5 billion pounds. The ministry sold 3 billion pounds in three-month treasury bills at an average yield of 13.95 percent, the same cost it paid on similar maturity debt last week, according to central bank data on Bloomberg. It had planned to sell 2 billion pounds.
Egypt also sold 1 billion pounds in nine-month securities, with the average yield rising to 15.26 percent compared with 15.209 percent last week, the data show.
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