CAIRO — Egypt's finance minister sharply revised down earlier estimates of the country's economic growth rate to 2.5 percent, and said the nation would try to broaden its "fiscal landscape" by trying to secure aid and reaching out to the oil rich Gulf Arab states.
Officials had earlier projected Egypt's economy would grow by roughly 4 percent, a level many analysts viewed as overly optimistic as fallout from the protests that toppled former President Hosni Mubarak in February mushroomed. Even that figure was a blow to a country that had forecast 6 percent growth before the start of the Jan. 25 popular uprising.
In a statement e-mailed Tuesday by his office, Samir Radwan said GDP growth could fall between 2.5 and 3 percent in the current fiscal year and that the budget deficit could widen to 8.5 percent from earlier estimates of 7.9 percent. The deficit could expand further, hitting 9.5 percent in fiscal 2011-2012, the statement said.
Radwan said the country's "fiscal landscape" needed to be widened, including securing outside aid or grants and that the government was intent on some immediate measures that would bring about new employment opportunities, such as developing infrastructure projects.
The effort reflects an attempt to deal with unemployment, one of the key catalysts behind the mass protests, and comes as chief revenue sources such as tourism and foreign direct investment are expected to take big hits.
Labor unrest that emerged after the popular protests that toppled Mubarak have sharply undercut productivity and manufacturing while banks are said to have curtailed lending — all trends that bode ill for the economy.
"I think they're trying to provide a buffer in case ... something tragic happens with the growth rate," said Nada Farid, an economist with Mideast investment bank Beltone Financial, adding that the expectation is that private consumption, which accounts for the brunt of GDP, will pick up in the fourth quarter of the fiscal year as more political clarity emerges in the country.
Farid said the 2.5 percent figure represents the "worst case scenario" and that the 3 percent GDP figure was the more realistic as production resumes after the near-daily labor strikes that ground manufacturing to a near standstill.
"It shows that the government is well aware of the magnitude of the economic impact of Egypt's political events and provides a more realistic picture of the economy," Beltone said in a research note.
Egypt has had little in terms of good economic news since the protests began in January.
In addition, the Egyptian pound has come under pressure repeatedly, forcing the Central Bank to step in at least once to support the currency. That pressure has reflected negatively on the country, with Egypt's sovereign rating taking a hit and the ratings of several major banks also affected.
Egypt's foreign reserves dropped to $30.1 billion in March, down $2.2 billion from the previous month, according to provisional figures posted on the Central Bank's Web site.Comment on this story
The drop appears linked in part to the Central Bank's earlier intervention to support the pound, as well as a drop in foreign capital inflows.
The stock market, shuttered for nearly two months, reopened on March 23 and has been seesawing between gains and losses, with institutional investors and foreigners seen behind much of the selling that has battered company share prices.
On Tuesday, the benchmark EGX30 index was down by about 0.7 percent, with its year-to-date drop standing at around 23 percent.