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Egypt’s economy
will grow steadily over the next two years thanks to growing private
investment but the expansion will be slower than that forecast by
government officials, a Reuters poll showed on Tuesday.

The survey of 12
economists predicted gross domestic product (GDP) in the Arab world’s
most populous nation will grow 5.4 percent in the fiscal year ending
June 2011, based on the median figure. Egypt’s economy is seen growing
faster than all Gulf Arab states except Qatar.

Forecasts from 13
economists showed it would grow 5.5 percent the year after, boosted by
more private investment and a recovery in Suez Canal and tourism
revenue.

“We forecast very
steady growth, mainly due to domestic demand and private consumption as
well as growth in private investments,” said Mohamed Rahmy, economist
at Beltone Financial.

“There is also a
gradual recovery in external sectors including the Suez Canal revenues,
tourism and non-oil exports.” The poll forecasts are well below the
annual rates of more than 7 percent that Egypt had posted before the
global financial crisis hit and the 6 percent annual rate that
economists say Egypt must sustain to create jobs.

Egypt’s finance
minister said last week he expected the economy to grow by 7 percent in
the financial year from July 2011, and 6 percent this year.

Egypt lowered its
GDP growth figure for the last fiscal year that ended June 30, 2010 to
5.1 percent from a previously stated 5.3 percent.

Supply shocks

The poll forecast
inflation would accelerate to an average of 11.4 percent in the
2010/2011 financial year, before falling to 10 percent the year after.

Economists expect rising food prices to push up inflation in this fiscal year, but with a contained effect the year after.

“We expect that
supply shocks will subside, and we see limited impact of vegetable and
meat supply shocks on inflation,” said Mohamed Abu Basha, an economist
at investment bank EFG-Hermes.

Urban consumer
price inflation, the most closely watched indicator of prices, fell in
the year to November to its lowest in 15 months at 10.2 percent.

The Central Bank of
Egypt held its benchmark overnight lending rate steady at 9.75 percent
at its last meeting on December 16, saying inflation was contained but
that limited investment and concerns over the global recovery could
weigh on the economy.

The Egyptian pound,
which fell this week to its weakest level against the U.S. dollar since
February 2005 to 5.8021, is seen remaining relatively steady at 5.80
for the financial year ending in June 2011 and the year after.