Egypt economic growth to remain slow despite Gulf aid

#EgyptTurmoil

Kuwait to supply Egypt with 85,000 barrels of oil daily but political uncertainty continues to keep tourists, foreign investors away

The slow performance is likely to continue despite a ‘fiscal stimulus’ from the Gulf (AFP)
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Thursday 12 February 2015 8:30 UTC
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Growth in Egypt's economy is expected to remain sluggish this year as political uncertainty keeps tourists and foreign investors away, the International Monetary Fund said Tuesday.

The economy of the Arab world's most populated country was forecast to grow by 2.7 percent this year after expanding by 2.1 percent in 2013, the IMF said in its World Economic Outlook.

"Growth in 2014 is expected to be broadly the same as in 2013, as political uncertainty will continue to weigh on tourism and foreign direct investment," it said.

The slow performance was likely despite the "fiscal stimulus" of support from Gulf countries, which promised billions of dollars in aid to Egypt after the army ousted president Mohamed Morsi in July.

Saudi Arabia pledged $5 billion in aid to the military-installed government in Cairo, with Kuwait and the United Arab Emirates offering a combined $7 billion.

"Large imbalances will persist unless structural reforms and fiscal consolidation are initiated," said the IMF, which was until last year negotiating a $4.8 billion loan to Cairo to help finance the government while it undertakes reforms.

Political changes in the country have set the talks back.

Egypt's economy grew at 5.1 percent in 2010, prior to the January 2011 uprising that forced president Hosni Mubarak to step down after ruling for nearly 30 years.

Meanwhile, Kuwait said Tuesday it will supply Egypt with 85,000 barrels of oil daily and 1.5 million tonnes of fuel for three years as part of a newly agreed commercial deal.

The supplies would be valued at market prices and delivered by the end of 2016 under the agreement struck on Monday, said Kuwait Petroleum Corp. marketing chief Ibrahim al-Mudhaf.

"The agreement is commercial and not political," Mudhaf was quoted as saying by the official KUNA news agency.

The deal would raise Kuwait's exports to Egypt to 85,000 barrels per day from 65,000 previously, and to 1.5 million tonnes of diesel and aviation fuel annually from 860,000, he said.

The two sides were also discussing two other contracts for Kuwait to supply cooking gas and fuel oil to Egypt, Mudhaf said, adding the agreements could be finalised within two months.

Cairo and Kuwait City were also discussing a number of oil-related investment opportunities, he said.

Following the Egyptian military's ouster of Morsi, Kuwait offered Cairo an aid package worth $4 billion.

The package included a grant of $1 billion, a deposit of $2 billion at Egypt's central bank, in addition to oil and oil products worth $1 billion.