Economic growth is slumping to less than 1 percent in the world's most developed economies - that much is clear. The outlook for Egypt is rather more robust. After growing 7.2 percent in 2007-08, the economy was forecast to grow more at a pace as high as 7.8 percent in 2008-09 by consensus of the Egyptian Ministry of Finance and Insurance (MFI) and private analysts. In light of the global economic slowdown, the MFI has cut its projected growth rate for 2009 to 6 percent, a figure in line with the International Monetary Fund's projection of 5.8-6 percent growth for the Middle East and North Africa (MENA) region.
Egypt is expected to avoid the worst of the current global economic downturn due to strong foreign direct investment (FDI) inflows (US $11.1 billion in 2006-07 and US 13.2 billion in 2007-08), the liquidity of its banking system, strong foreign reserves and a diversified economy that does not excessively rely on any one market segment, especially exports.
Moreover, inflation is cooling from a previously worrisome 23.6 percent in August 2008 to 18.7 percent in December 2008. The MFI is now projecting that the slowdown in domestic growth coupled with the global slump in commodities prices will see inflation cool to 12-13 percent in 2009.
Egypt has a number of economic fundamentals that attract foreign investment, from its geography, information and communications technology infrastructure and abundant natural resources.
In the real estate sector, for example, average residential property prices in Egypt remain the lowest among competitor countries in the region, registering just over US$ 400 per square meter in 2007 compared to more than US$ 4,000 in Dubai, US$ 2,600 in Tunisia and US$ 1,200 in Morocco in the same year.
And while increased foreign ownership of Class A properties in Egypt has pushed prices for those luxury properties close to those of their Dubai counterparts, Triple-E expects that the next real estate boom will take place in mid- to low-level properties where supply is not expected to meet the overwhelming demand anytime soon. Also, a maturing, more competitive mortgage finance system is expected to increase the purchasing power of Egypt's growing middle class.
So far, the primary victim in Egypt of the global economic retreat has been the country's stock exchange, where the benchmark CASE 30 index has dropped more than 45 percent since January 2008.
Triple-E believes Egypt's private equity market offers a much safer investment and higher return potential than a stock market, which has increasingly been influenced by the volatility of its counterparts in the MENA region and around the world.