Snapshot

Even though a bailout package finally came together to help Greece avoid defaulting on its debt, questions about whether it will be enough and whether similar crises could crop up in Italy, Portugal or Spain continue to make people nervous, which has led to a drop in our confidence index to below 50%.

Throughout 1H2010, our respondents were becoming more and more optimistic about the global crisis coming to an end, with some saying that the crisis is already over.

But this month has seen a setback with more respondents expressing uncertainty or fearing a drawn out recession. Even more telling, none of our respondents said that the global crisis is over.

Orascom Telecom has been in locked in a battle with the Alegerian government for several months. When attempts to sell off African assets were killed by Algeria’s refusal to let go of Djezzy, OT was denied the liquidity that would allow it to move into more lucrative markets.

Sentiment is moving slightly against government economic policies: 44% of respondents believe that government policy hurts economic growth and only 32% say that government policy is helping the economy grow.

The Insider

Despite the pessimism over global trends, businesses reported sales growth over the last three months, saying that company policies of consolidating gains have helped maintain a steady, slowly growing workload. Services and trade reported stronger growth than construction or manufacturing companies, and large companies did better than small or medium size enterprises.

Both companies that are doing well and companies that are suffering cite the global economy as partly responsible. Since the global recovery has been uneven, with much of the world recovering slowly and a few countries threatening to kick off another slowdown in Europe, it shouldn’t be surprising that the effect of the global economy on Egyptian industry is mixed as well.

Our respondents are generally not constrained by a lack of finance, and 60% say that they are mostly self-financed. Over a fifth report that their liquidity problems are being exacerbated by difficulty finding external funding, with medium size companies having the hardest time. Large manufacturing firms were the least affected by a lack of outside financing.

This Month

In the News

The continuing problems in Greece are the most important story of the month, according to our respondents. There are concerns that investors will pull money out of Egypt to reduce the overall risk in their portfolios.

More specifically, the weakening euro was seen as the second most important story. A weak euro could lead to fewer exports, and of course European financial problems always have the potential to hurt the tourism industry.

Rising prices came in third place this month, down from second place last month. Respondents singled out the rising price of iron specifically.

Finally, Orascom Telecoms’ (OT) troubles with Algeria are still in the news. OT has agreed to negotiate the sale of Djezzy to the Algerian government, and our respondents clearly consider the outcome to be important to the overall economy.

EventRankCrisis in Greece 1stDepreciating euro 2ndRising price of iron 3rdOT’s problems in Algeria 4th

The Forecast

There is a broad consensus that the key economic factors, after corporate strategy, are the recovering global economy in the short term and changes in government policy in the long term.

Short-term expectations were roughly the same regardless of company size. The service industry was slightly more optimistic than manufacturing or trade, but construction was more pessimistic than the other three: Only 13% expect the economy to get better and 40% think things will become noticeably worse.

The construction industry’s pessimism reaches into the long term with only a third of the sector saying that the economy will improve and a quarter expecting a decline. A full 50% of the service industry expects to see growth in the next two years.

Companies are mostly reporting that their debt levels are well under control and are likely to decrease over the next two years. Of those companies that do expect debt levels to increase, a third say the debt will finance corporate growth and acquisitions.

The prospects for job growth are strong in the next two years. The construction sector expects the weakest job growth, and even then 48% say they will be hiring new people. None of our respondents in the construction industry expect their workforce to decrease over the next two years. Large companies expect to do most of the hiring. bt

Operationally Speaking

Percentage of firms executing new projects

When Will the Crisis End?

DurationPanel ResponseIs Already Over0%Less Than One Year33%One to Two Years13%More Than Two Years21%Not Sure33%