(Bloomberg) -- Egypt expects private investments to take the lead in driving economic growth this year, the planning minister said, suggesting that investor confidence had rallied enough to supplant what has so far been an overwhelming reliance on government spending.
Private investments are expected to contribute 60 percent of economic growth in the current fiscal year ending in June, compared to 48 percent last year, the minister, Hala El Saeed, said in an interview in Cairo. The figure is expected to rise to between 62 percent and 65 percent in the coming fiscal year, she said.
The comments reflect new confidence in sweeping reforms launched in November 2016 with the floating of the pound and subsidy cuts -- measures aimed at kick-starting an economy that had struggled since the 2011 ouster of President Hosni Mubarak. The flotation of the currency helped secure a $12 billion International Monetary Fund and ended a dollar shortage that had crippled business activity.
In a region riddled with political strife, Egypt represents a “safe haven,” El-Saeed said, adding “the economy is responding well to the government’s reform plan.” The economy grew by 5.2 percent in July- September with investments, rather than consumption, driving the growth.
While the IMF loan helped restore investor confidence, with foreigners pumping over $19 billion into the local debt market, foreign direct investment has been slow to come. FDI fell by about 16 percent, to about $1.6 billion, in the July-September period compared to a year earlier. Meanwhile, Egypt slipped six spots, to 128, in the World Bank’s Doing Business Report 2018 that covers ease of operations in 190 countries.
Inflation that had spiked on the back of the pound’s flotation to almost 35 percent decelerated to 21.9 percent in December. In addition, the economy is forecast to grow by about 5.5 percent this fiscal year -- the highest level in about nine years, she said. The IMF is projecting growth rate of 4.8 percent.
El-Saeed also said:
- Manufacturing grew 7 percent July-September; oil sector by 8.8 percent; real estate and construction by 12.5 percent; agriculture by 3 percent
- Economy to grow 6 percent in 2018/19, 7 percent in 2019/20
- Expect economic growth to exceed 5.2 percent in October-December
- Government is studying a sovereign fund to manage state assets.
©2018 Bloomberg L.P.