Consumer durables is a cataloguing of consumer goods that are not essential to be bought very often as they are fashioned in a way so as to last for an extended period of time. Profits in the consumer durables sector were most profoundly…
BMI View: Once the fog of revolution has cleared, we expect a young and growing population to support
a strong 6.25% real growth between 2013 and 2016. However, with the above in mind, we highlight that
the sheer breadth of projects currently under consideration will require a huge investment drive, and will
be almost wholly reliant on FDI. As such, although we believe that growth will pick up from 2013 and
that ambitious plans to encourage investment pose an upside risk to our forecast, we note that the pace of
development will be restrained by issues pertaining to financing.
Construction activity has suffered throughout 2012, in line with our expectations, and we expect the
industry to face continued challenges in the months ahead. Q112 data revealed that the construction sector
underwent a 9.4% year-on-year (y-o-y) contraction and overall we estimate that sector contracted by
around 6.0% in 2012.
Key trends and developments in the sector:
In November, the European Investment Bank (EIB) approved a EUR600mn loan for the Cairo
Metro-Line 3 project and has released the first EUR200mn tranche. The loan is for the third
phase of the Line 3 construction, extending the existing line by 17.7km, which will include 15
new stations. The first phase of the east-west metro line was inaugurated in February 2012,
running 4.2km, from Attaba to Abbasia in eastern Cairo. The second phase is under construction
and due to be completed by 2014, and the third phase is in the design stage. The loan is for an
extension that will take the line under the Nile to the western sections of Cairo.
In terms of aid, Egypt has been the beneficiary of a significant amount of Gulf Cooperation
Council (GCC) funds since last year's revolution. Egypt has recently received more than US$5bn
in loans and grants, including US$2bn from Qatar, and loans from Saudi Arabia and the Islamic
Development Bank. Representing the widening fiscal deficit and the rising costs of servicing
debt, Cairo has also recently requested for $4.8 billion in emergency funding from the
International Monetary Fund (IMF), and officials in the US have noted that the Obama
administration is close to providing US$1bn in debt relief - at the same time, 50 U.S.
corporations visited Egypt to explore investment opportunities.
It was announced in September that Qatar has agreed to pump a huge US$18bn worth of
investment into the Sinai region of Egypt, supporting our view that the country's construction
industry will pick up dramatically from 2013 onwards. The news came just days after the
Egyptian government revealed that discussions had been held over a vast development plan for
the region, and represents an increasing trend of Gulf - North African cooperation in the
infrastructure space. Noting the risks, we highlight that forthcoming projects will likely be
blighted by a dearth of financing options.
The Egyptian Government has made an annual budgetary provision of US$850mn for new city
infrastructure projects, it was reported in July. The US$850mn figure was disclosed by the
Egyptian Finance Ministry and represents the budget for the New Urban Committees Authority
(NUCA), whose agenda covers the establishment of new cities in the Egyptian periphery. It aims
to direct the population away from the overpopulated capital, Cairo.