Year Ender: Egyptian poor fail to feel benefits of economic recovery

In 2010, Egypt witnessed moderate economic recovery despite the international financial crisis. However, in a country where half of the population lives near the poverty line, the middle class and poor failed to reap the benefits of growth.

In 2010, income from the Suez Canal, tourism, and remittances from expatriate Egyptians climbed. However, this increase did not effectively reduce the budget deficit, unemployment rates and salary levels.

The real estate sector–which employs the largest number of Egyptian workers–grew slowly.

By the end of the first quarter of the fiscal year 2010/2011, rose to 5.6 percent, up from 5.3 percent the previous fiscal year.

Economic growth dropped to 4.7 percent during the fiscal year 2008/2009 at the peak of the international financial crisis, down from 7 percent during the preceding three years.

In 2010, the inflation rate declined to their lowest levels in 15 months. The inflation rate recorded for November 2010 was 10.2 percent, the lowest level since August 2009 when inflation stood at 9 percent.

Egypt's major economic sectors generated high revenues.

Revenues from the Suez Canal climbed 12 percent during the first quarter of the current fiscal year. Canal revenues dropped by 3 percent in the fiscal year 2009/2010 but increased 10.3 percent from January to November 2010.  

The rate of tourism sector growth during the first quarter of the current fiscal year registered 12.1 percent compared to only 1.3 percent in 2008/2009.

In the first quarter of the current fiscal year, the total number of foreign tourists reached 3.7 million, up 15 percent from the total number recorded for the same period last year.

Remittances from expatriate Egyptians rose considerably in 2009/2010, exceeding US$9.75 billion.

Remittances rose by 30.3 percent in the first quarter of the current fiscal year.

The official rate of unemployment slightly slipped from 9.36 percent in the previous fiscal year to 8.94 in the same quarter of the current year.

Despite the positive indicators, the state budget deficit has not been reduced and prices remain elevated. Some believe that price hikes threaten to fuel a revolution, especially with salaries as low as US$17 a month in some jobs.

President Hosni Mubarak acknowledged that a large sector of Egyptian society has failed to reap the benefits of economic growth.

A report by the Chamber of Food Industries of the Federation of Egyptian Industries said that the prices of sugar, wheat, rice continued to soar during the first week of December.

Abdel Fattah al-Gebali, an economic expert and the head of the economic research unit at Al-Ahram Center for Political and Strategic Studies said Egyptians did not benefit from economic expansion due to what he termed the "period of delay".  

Al-Gebali said that this period precedes a period of high economic growth and will last until the lowest segments of the society begin reaping the benefits of growth.

One factor contributing to the plight of the poor is that the sectors witnessing the growth, such as the technology sector, do not require intensive labor, he added.

According to rights reports produced in April 2010, the deterioration of living conditions in Egypt has persuaded skilled and unskilled workers to take to the streets.

In a report issued in April by the human rights organization Sons of Earth, the 12 months from May 2009 to April 2010 saw 169 sit-ins, 112 strikes, 87 demonstrations, 63 protests and 21 assemblies.

In April, following a long legal battle and a string of protests, the National Council for Wages set a new minimum wage that barely surpassed the poverty line.

The administrative judiciary obliged the government to set a new minimum wage of LE400 monthly–the equivalent of US$2.3 a day. The World Bank has set the poverty line at US$2 a day.

But the battle is far from over. Rights organizations and labor associations have called for raising the minimum wage to LE1200.

Kamal Abbas, general coordinator for an NGO concerned with labor rights, said the minimum wage has only been partially implemented in private and public sectors.

The battle will continue until the minimum wage is fully implemented, he said, adding that labor strikes will continue into next year since wages do not match the continuous rise in prices.

Labor protests proliferated in Egypt this year, said Abbas, adding that new categories, such as teachers, will likely join the protests.

A report by the Central Bank of Egypt said that the budget deficit in the first quarter of the current fiscal year has risen to US$6.6 billion compared to US$6.3 billion in the same quarter of the previous fiscal year.

The real estate sector, which is the most labor-intensive of sector in Egypt, grew slowly in 2010. It decelerated during the beginning of winter, a time that normally sees slower activity for the real estate market.

Real estate sales slid by 40 percent from last year due to price increases and low supply-demand ratios.

Salah Hegab, a real estate expert and the head of a construction committee at the Egyptian Businessmen Society, said that the previous year saw a greater supply of higher-scale and luxury housing, the consumers of which belong to the upper class. This segment of the population, however, has already satisfied their real estate needs, especially in Cairo.There is a need to diversify real estate supply in order to cater to the needs of the lower segments of the society, he added.

Foreign direct investments declined by 16.7 percent. The net income from cash flows totaled US$6.8 billion compared to US$8.1 billion in the previous fiscal year.   

Rashad Abdo, an economic expert and university professor, said he does not see a link between the decline in direct investments and fears of a power transfer to the president's son prompted by reports about the deteriorating health of President Hosni Mubarak.

Abdo attributed the decline in foreign direct investments to "economic scarcity" caused by the gobal financial crisis.

Meanwhile, the Egyptian government said it is ready to cope with continuing repercussions of the global financial crisis in the coming period.

Minister of Economic Development Mohamed Osman said in October that the government is examining the possibility of putting in place a new fiscal policy to face continuing fall-out from the crisis. The Egyptian government injected LE25 billion in the economy to revitalize it as part of a two-phase plan that managed to counter several negative impacts of the crisis.

The Ministry of Finance said it will depend on partnerships with the private sector, especially in the field of infrastructure, as a means to promote economic growth and create job opportunities over the coming period.

Abdo added that the past year's economic stimulus plans included bolstering exports in order to encourage industries to retain labor.

The coming period, he added, will see more loan-giving to government authorities, companies and individuals to reduce unemployment and boost tax revenue.The economic stimulation plan should provide for economic growth above 6 percent by the end of 2010/2011, he said.


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