Abstract
In light of the ongoing global economic slowdown, as well as a deteriorating
security situation in the Gulf
of Aden threatening Suez Canal traffic, our
2009 and 2010 growth forecasts have been slashed. The
Egyptian year 2009
refers to the 12 months to July 2009; thus the damage for 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.
President Obama’s
visit to the Muslim world in Cairo on June 4 and his plans for engagement
with
countries that the US has formerly shunned, such as Iran and Syria,
will have eased security concerns
generally in the region. 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. President Hosni Mubarak is
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, we expect the opposition Muslim Brotherhood (MB) will
capitalise
on this issue (although Egypt continues to confront the MB – it arrested
33 members in mid-
May), particularly amid the turbulent economic
conditions. Some 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
This quarter, we have introduced a
significant new aspect to BMI' s Defence Reports, which is the City
Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR
takes into account the
overall BMI Terrorism Rating for the country in
question. It also incorporates the ' prevalence' of
terrorism, which
recognises the frequency of attacks and whether the city is a target for
terrorists. The
CTR also recognises the ' threat' of terrorism in terms of
the likely numbers of victims and the ability of
groups to launch
sustained campaigns. In Egypt, we assess the CTRs for Cairo at 62.5. In the
Middle
East, Cairo rates higher than 13 of the 23 major cities of the
region.
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