Issue No. 602
Economy
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5 - 11 September 2002 Issue No. 602 Economy |
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| Published in Cairo by AL-AHRAM established in 1875 | Recommend this page | ||
The worst is over
The Egyptian Centre for Economic Studies has released its latest Business Barometer Report
The Business Barometer report provides us with an assessment of economic growth in terms of production, sales, inventories, prices, employment and investment.
The latest report, covering the first half of 2002, attributes the beginning of an economic recovery to a pick-up in tourism, increased exports due to the devaluation of the Egyptian pound, and expansionary fiscal policy.
It states that, "left to market forces alone, the economy will eventually recover. However, the process could take some time. To speed up recovery, further actions are needed in the short run, possibly involving active monetary policy, greater exchange rate flexibility, and prudent fiscal policy. In the medium-term, attaining respectable rates of economic growth cannot be achieved without attracting foreign savings, increasing exports and improving efficiency. These objectives require a second generation of structural reforms no less dramatic than those adopted in the early '90s."
The majority of those surveyed in the report saw economic growth decline or remain stagnant during the first half of 2002. However, firms did report an improvement in their economic situation compared with the last six months of 2001. Expectations for the rest of the year are even more positive, particularly in construction and manufacturing.
Tourism has also recovered to pre-11 September levels. Exports have increased by a monthly average of 27 per cent, while imports declined by 2 per cent per month.
However, there are indicators that the economy is still under-performing. Monetary policy has remained tight and real interest rates have been too high to stimulate investment. Although pressure on the pound has subsided, there are indications that the official exchange rate is not at the market clearing level.
Despite this, more than half the firms surveyed (52 per cent), plan to increase their production in the remainder of the year, especially those operating in tourism.
On average, 69 per cent of firms sampled reported that domestic sales either remained the same, or increased in the first half of the year, compared with the last six months of 2001. Similarly, 65 per cent of respondents reported that international sales went up or stayed constant. Almost half of the firms in the sample expect domestic sales to rise, while 60 per cent expected exports to increase during the coming six months.
The majority of respondents (82 per cent) reported stable, or increased, final product prices during the first six months of 2002.
Although the majority of firms reported no change in investment in the first half of 2002, 23 per cent of firms saw an increase in investment, compared with only 14 per cent in the previous six months. Increased investment was seen in manufacturing and construction. Tourism reported the lowest levels of investment.
Although firms surveyed since July 2000 have consistently reported decreases in employment, fewer firms reported constant or lower employment in the first half of 2002 (88 per cent) than in the second half of 2001 (95 per cent). As expected, firms involved in tourism reported the biggest decline in employment levels.
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