Abstract
We have revised down our forecasts for construction sector growth this
quarter, due to the deteriorating
global economic environment. Egypt is
not as vulnerable as some regional countries to the current
negative
global trends, but it is by no means escaping unscathed. The Daily News Egypt
quotes
government statistics as saying that 200,000 jobs were lost in
2008, and with growth slowing sharply, we
would expect to see more
cost-cutting in the private sector, translating into more job losses -
probably in
the real estate/construction, tourism and export-oriented
industries. We have revised down our forecast
for real construction sector
growth in 2009 to 4.0%, from 10.6%. Nonetheless, our forecast for
construction sector growth is above that for the economy as a whole. This is
due to supportive policies
from the government, as the Mubarak
administration seeks to maintain economic and political stability.
The
government has eliminated customs duties on capital goods (from between 2% and
5%), as part of a
EGP15bn stimulus package, which should lend support to
infrastructure. We predict that construction
sector growth will be at
– or slightly above – 5% in real terms in 2010.
Risks to our
forecasts are largely to the downside. Much depends on how prolonged the
global economic
downturn is, which could have a profound effect on both
the demand for (and the financing of) private
sector-orchestrated
construction activity considerably beyond the end of 2009. Other risks
include
terrorism, particularly given the Egyptian government’s
closeness to the West in an environment where
the Israeli invasion of Gaza
will likely radicalise opinion.
In December, Oriental Weavers, the
world’s largest carpet manufacturer, said that it was delaying
construction of a new US$235.2mn factory due to the worldwide financial
crisis. Originally planned for a
mid 2009 opening, the company has delayed
the new plant until sometime in 2010. Also in December
2008, Egyptian
President Mubarak officially opened the new terminal at Cairo Airport. The
US$561mn
new Terminal 3 will increase passenger capacity from 10mn to 22mn
per year. The 1.7mn square foot
terminal contains more than 160 elevators,
escalators and moving walkways and has enough parking
capacity for 3,000
cars.
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