Egypt Economy May Miss Growth Target, Stoking Social Unrest

Egypt’s economy may fail to meet the government’s growth target, a Bloomberg survey showed, threatening the country’s recovery from an uprising that ousted President Hosni Mubarak this year.

Economic growth may slow to 1.6 percent in the fiscal year that started this month as private investment falters, according to the median estimate of 10 economists. Egypt’s government is predicting an acceleration to 3.2 percent from the previous fiscal year’s 2.6 percent. Prior governments had said 7 percent is needed to keep joblessness from rising.

“The biggest danger is unemployment because it could lead to social unrest,” said Mona Mansour, co-head of research at Cairo-based investment bank CI Capital, who is forecasting a growth rate of 1.8 percent. “For investors to come there has to be security and political stability.”

Slower growth and a widening budget deficit may also imperil Egypt’s credit rating, Mansour said, at a time when renewed protests are prompting investors to demand more money for the risk. The extra yield investors demand to hold Egyptian debt over U.S. Treasuries rose 15 basis points, or 0.15 of a percentage point, last week to 323, according to JPMorgan Chase & Co.’s Global Emerging-Market Index. Middle Eastern debt yields on average rose 1 basis point to 349, the data show.