SWEIMEH, Jordan (Reuters) - Egyptian unemployment is set to rise from around 9 percent now because the most populous Arab country is not sustaining high enough economic growth to support its population, the trade minister said on Saturday.
Egypt needed to achieve economic growth of 6 percent in order to create enough jobs for its youthful population, Rachid Mohamed Rachid told Reuters on the sidelines of the World Economic Forum at the Dead Sea in Jordan.
Prime Minister Ahmed Nazif had said on Friday the economy was likely to keep growing by at least 4 percent. However, a fifth of Egypt’s 80-million-strong population live on less than $1 a day.
“At the moment, we are almost at 9 percent (unemployment) -- I can’t give you an exact figure, but definitely we are going to see a rise of probably 0.5, 0.6 percent,” Rachid said of his outlook for the first quarter of the fiscal year that starts on July 1.
Egypt had unemployment of 9.4 percent in the first quarter of 2009. Earlier this month the country said there were some 2.34 million people unemployed out of a workforce of 25 million.
“We are at the moment at 4-1/2 percent (growth) which means that we are creating jobs but we are not creating enough jobs to cater to the 650,000 new applicants every year,” Rachid said.
“I am confident that we are at probably 60-70 percent of our target of 650,000.”
Economic growth closer to the 6-7 percent of recent years would “hopefully” resume next year or the year after, he added.
While some industries like tourism have been hard hit by the global recession, Rachid said the labor-intensive housing and construction sectors were among those performing better.
Egypt is facing a shortage of between two and 2.5 million homes for the middle and lower classes, he said.
“That is a demand that exists in Egypt. It will not be impacted by the global economy,” Rachid said. “You have growth happening (in construction) because you have a lag ... I would not exclude totally the fact that they will be impacted but it’s a matter of timing.”
Rachid agreed with Nazif that inflation would likely fall to single-digit levels later this year after exceeding more than 20 percent in the middle of last year.
He added Egyptians working abroad, especially in the Gulf region, had not been returning in as large numbers as expected.
Oil exporters Saudi Arabia, the United Arab Emirates and Kuwait all face economic contractions this year, although growth is continuing in non-oil sectors, the IMF said last week.
“We have not seen any significant returns ... we know that the economy (Saudi Arabian) is relatively doing well, they have been one of the best in the region in dealing with the crisis,” Rachid said.
Remittances from Egyptians working abroad, along with Suez Canal revenues, tourism, and oil and gas exports are key sources of foreign currency for Egypt. The country earned $8.56 billion from remittances in the 2007-2008 fiscal year and $6.32 billion the year earlier, government data show.
“The impact on labor has been almost zero, same with most of the Gulf, with very few exceptions but the numbers are much less than what we are expecting,” Rachid said.
Writing by Yara Bayoumy; Editing by Daliah Merzaban