Abstract
Egypt seems to be weathering the global economic slowdown better than anybody,
including its
government, expected. The government said in August that its
deficit for the fiscal year that ended in June
was 6.9% of GDP, better
than most forecasts, despite a big increase in public spending to offset
the
slowdown elsewhere. The government’s support for the economy has
not spared the country’s
infrastructure sector, but the fiscal
performance gives it a bit more room to manoeuvre in the future.
Given
that next year will bring a worsening of the economy, the room is likely to be
needed.
BMI expects that the construction industry’s value will grow
a mere 1.73% in 2009, and the pace of
growth will decline even more in
2010, to a rate just over 0.0%. We do not expect the growth rate to get
above 2% until 2013, when it should reach 3.25%. Construction will account for
a smaller and smaller
portion of the country’s GDP over that period.
Our forecast for economic growth is 3.7% in 2009,
although the government
is still expecting a more rapid pace. In 2008, growth was 7.2%. The
slowdown
will continue in 2010, when we expect growth of 2.5%, before it
picks up to 3.3% in 2011.
The government announced a quarter earlier that
it would double its planned EGP15bn (US$2.65bn)
stimulus package, but
projects are harder to find than money. The latest quarter showed a marked
slowdown in announcements, and one government official acknowledged the
shortage of projects. But
activity was strong enough for the government to
loosen up the rules to allow cement to be imported more
quickly and it
extended its ban on exports.
The government did take another step on one
of its biggest projects, the construction of its first nuclear
power
station. After a consulting contract with Bechtel Corp. collapsed amid legal
issues, the
government hired Australia’s WorleyParsons Ltd. to
handle the consulting. Russian President Dimitry
Medvedev, apparently
eager to get some of the nuclear work for Russian contractors, paid a two-day
visit
to Egypt to improve trade ties.
In January 2009, the World Bank
announced that it will lend Egypt US$600mn for the construction of
the Ain
Sokhna power plant. The World Bank loan will be partly financed by the African
Development
Bank and the Arab Fund for Economic and Social Development.
The loan is to help the Egyptian
Electricity Holding Company (EEHC)
finance the plant, which will be a supercritical steam turbine
plant with
a capacity of 1,300MW. The plant will consist of two 650MW turbines and will
be mostly
powered by natural gas. The plant will be managed by the East
Delta Production Company, a
subsidiary of EEHC, and is expected to be
completed in 2013.
There has been a clear strategy of constructing power
plants in Egypt recently, and the World Bank notes
that 1,300MW of new
capacity is being installed per year. In March 2009, as reported by
Reuters,
Egyptian construction firm Orascom received a contract to
construct a US$258mn, 1,300MW thermal
power plant in Alexandria. The
client for the project is the state-run West Delta Electricity Production
Company, which is currently constructing a number of power plants in Egypt and
Algeria. The projects
will have a combined generating capacity of
4,150MW.
The government also invited international companies to bid for a
250MW wind farm, the first part of a
phased plan that will see the state
paying for a little more than 2,000MW of wind-generated electricity
capacity. Reports on the number of interested companies ranged from the mid
20s to more than 70. Even
the lower reports reveal strong interest.
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