Boston, MA -- (SBWire) -- 11/22/2013 --Construction activity in Egypt has gained momentum, with the segment having registered 6.6% real growth in the first nine months of FY2013, according to the Bank of Egypt. This has prompted us to revise up our real growth forecast for FY2013 to 5%, although we still expect growth to slow down over FY2014, as the business environment has deteriorated due to the recent political upheaval in the country. Construction growth in Egypt is dependent upon demand for projects and foreign investment. Given the current unstable political climate, we remain cautious over the medium term.
We believe that the country's highly uncertain policy backdrop will continue to undermine greenfield investment. Political risk has particularly affected the inflow of foreign direct investment (FDI). We have seen total FDI decrease rapidly since FY2009, reaching a low of US$1.2bn in FY2012. On the demand side, below-par economic growth will continue to weigh on the residential and commercial construction sectors.
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Key Trends And Developments
- The interim government in Egypt is reportedly pushing ahead with the tender for the Safaga Port PPP. This port is located on the west coast of the Red Sea and it serves both tourists and trade industries. With an estimated cost of US$858mn, this is considered to be the third most important PPP project in the pipeline after the Abu Rawash wastewater plant and the waste recycling initiative.
- We expect FDI and aid receipts to continue to play a significant role in Egypt's construction industry growth. Investment and cooperation between Egypt and Gulf Cooperation Council (GCC) states has intensified markedly in recent months and we believe that this trend will strengthen over the coming years.
- In terms of aid, Egypt has been the beneficiary of a significant amount of GCC funds since the 2011 revolution. The country has received more than US$5bn in loans and grants, including US$2bn from Qatar, as well as loans from Saudi Arabia and the Islamic Development Bank. Since the overthrow of the Muslim Brotherhood, Saudi Arabia, UAE and Kuwait have pledged a total of US$12bn in assistance.
- It was announced in March 2013 that Egypt's Ministry of Energy and Electricity is seeking to issue tenders for three local power generation projects, which will have a total power generation capacity of 5,500 megawatts and involve the investment of nearly EGP50bn (US$7.42bn). The Egyptian government also announced that it intends to establish the country's first nuclear power plant. The facility is scheduled to begin operations by 2020. Moreover, the government intends to develop a total of four nuclear power plants, with a combined power capacity of 4,000 megawatts, by 2025.
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New Market Research Report: Egypt Infrastructure Report Q4 2013
New Construction market report from Business Monitor International: "Egypt Infrastructure Report Q4 2013"