Growth forecasts slashed due to deteriorating security situation in the Gulf of Aden

July 29, 2009 - PRLog -- We have slashed our 2009 and 2010 growth forecasts in the light of the ongoing global economic slowdown, as well as a deteriorating security situation in the Gulf of Aden, which is threatening Suez Canal traffic. Because the Egyptian year 2009 refers to the 12 months to July 2009, the damage this year will be mitigated: in the first quarter, real GDP expanded by 5.2% - a sharp slowdown from the overall 2008 rate of 7.2% admittedly, but still a robust number. Going forward, this will slow to a full-year rate of 3.7%, and then fall further to 3.0% in 2010. Thereafter, we are expecting growth of 4-5% for the remainder of the forecast period.

We have revised down our short-term political risk rating for Egypt from 66.0 to 63.5, on the back of the Israeli attacks on the Gaza Strip. Apart from the physical risk of the violence spilling over the border, the conflict has made President Hosni Mubarak more unpopular than ever, with internet calls for his assassination, and protesters around the Islamic world blaming him, as well as Israel and the US, for the suffering in the Strip. The government is managing to keep a lid on protests at the moment, and our rating is still relatively high, indicating that our core view is for the maintenance of the status quo. However, the opposition Muslim Brotherhood (MB) will capitalise on this issue, particularly amid the turbulent economic conditions: 200,000 jobs were axed in 2008, and more cuts could be on the way. Any increase in the size and intensity of the protests would be dangerous for the regime.

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