Egyptian exports start to boom
Egypt is in the early stages of an export boom, suggesting its economy could begin to recover in the next few months if a minimum level of political stability is restored.
Helped by a falling Egyptian pound, non-oil exports have grown at double-digit annual rates since early this year despite violence on the streets and deep uncertainty over the country's political future.
Egypt's export sector accounts for only slightly more than 10% of the overall economy, and this relatively modest contribution cannot by itself end high unemployment or generate enough tax revenue to fix the government's shattered finances.
But the surge in exports, which has received little publicity amid this year's flood of bad economic news from Egypt, shows many manufacturers are finding ways to ride out the political turbulence - and could enjoy strong growth if the country eventually gets a stable government.
"It's a good sign if they're managing to achieve that kind of export growth, especially in the current environment," said John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment firm.
Overall Egypt still runs a huge merchandise trade deficit, which was $23.8bn in the financial year to March, although this was already 2.7% narrower than in 2011-12 as exports grew and imports remained steady.
In the separate energy sector, which accounts for about a fifth of overall exports, Egypt has sharply cut back natural gas shipments, diverting supplies to the domestic market to avoid power shortages.
Recovery
Egypt's non-oil exports grew strongly for much of the past decade, rising 18.5% to $18.6bn in 2011, the year when Hosni Mubarak was overthrown, according to the State Information Service.
Their growth plunged last year as the election of Islamist president Mohamed Mursi worsened political tensions and deterred investment; industrial unrest, poor security, fuel shortages and difficulties obtaining finance hit many companies.
Non-oil exports inched up just 2% in 2012, less than half the rate of consumer price inflation. But shipments began to recover around the start of this year, rising 7% from a year earlier in the first two months of 2013.
Trade minister Mounir Fakhry Abdel Nour told reporters that non-oil exports jumped 21% year-on-year in June, a month when big Egyptian cities were rocked by mass protests against Mursi that led to his overthrow by the army on July 3.
In many ways, the operating environment for Egyptian companies has remained as tough as it was last year. But exports of low-technology, cost-sensitive products such as textiles, food and leather have jumped, businessmen say.
Textile exports rose 16.5% from a year ago, according to the Textile Export Council. Processed food exports climbed 26% year-on-year in the month of May alone, and were nearly twice their level in May 2010.
A major reason for the export recovery is the depreciation of the Egyptian pound, which makes shipments more competitive. Depreciation accelerated in the first half of this year.
There are also signs that some Egyptian exporters are starting to tap fast-growing demand in markets beyond Europe and the Arab world, their traditional focuses.
Non-oil exports to non-Arab African countries surged 28% from a year earlier in the first five months of this year. Exports to the Arab world climbed 20%, helped by an economic recovery in neighbouring Libya after its civil war.
Bulgaria set to slash electricity prices
The DKEVR state energy regulatory commission late on Monday approved the price cut, which will come into effect on August 1, as the EU's poorest country continues to struggle against high bills, the commission said.
Last winter, high electricity bills sparked mass street protests against low living standards, growing poverty and unemployment, forcing out the previous conservative cabinet.
New protest rallies have called for the resignation of current technocrat Prime Minister Plamen Oresharski in office only since May.
To appease public anger, Oresharski's government has passed a package of social measures but the daily protests have continued for the 47th day on Tuesday and the electricity price cut was not expected to put an end to them.
Bulgarians pay about eight cents per kilowatt hour of electricity half of what consumers in wealthier EU countries pay their power utilities.
But incomes in the Balkan country are also just a fraction of the rest of the bloc, with monthly salaries averaging about €400 ($530) and pensions at €138.
Slumping household consumption and meagre exports contributed to an overheating energy production sector this year, prompting authorities to curtail output, while deals on expensive green energy prevented utilities from lowering costs for consumers.
Under the new move, all clients of the three power utilities Austrian EVN, Czech CEZ and Energo-Pro will see daytime electricity costs reduced by up five percent and nighttime costs by up to about seven percent.
Spain's economy close to leveling off
Spain's economy all but emerged from a two-year slump in the second quarter but its recovery looks fragile at best, given weak consumer demand and a simmering political scandal at home and faltering growth abroad.
Gross domestic product shrank 0.1% between April and June from the previous quarter, according to Tuesday's data from state statistics agency INE, which matched a Bank of Spain estimate given last week as well as market forecasts.
Between January and March the economy shrank 0.5%.
Given the signs of an upturn in economic activity, also including the first drop in unemployment in two years in the second quarter, Economy Minister Luis de Guindos has called an end to Spain's recession.
Many economists are not convinced.
"We're not counting on a further improvement in the third quarter and are very sceptical of any statement that the recession in close to being over," Ebrahim Rahbari, an analyst at Citi in London, said.
Spain's economy has been in and out of recession since 2008, when a burst property bubble undermined the foundations of one of the country's key pillars of growth, construction.
That sent unemployment to record highs, depressing business and saddling the banking system with billions of euros of soured real estate assets and loans.
Spain's biggest bank Santander SA, which insulated itself against the worst of the market meltdown by expanding its already dominant foreign operations, said on Tuesday half year group profits rose 29% on lower loan losses.
It said operating earnings were hit by the sluggish Spanish economy but also offered hope the impact of the property slump on the government and lenders - bailed out last year with €42bn of European aid - might be easing.
It said provisions against loan losses which many Spanish banks booked heavily in 2012 - dropped sharply, and that it might consider buying nationalised banks Catalunya Banc or NCG Banco if they came up for sale.
Temporary respite
Since 2008, already subdued domestic demand has been knocked back further by tax hikes and spending cuts aimed at balancing a budget which has one of the largest shortfalls in the eurozone.
Growth-friendlier policies have played a bigger role in Europe's economic debate in recent months as austerity has lost its lustre, but Spain's still high fiscal imbalances mean more budget cuts will have to be made, potentially hitting the tentative signs of recovery.
Meanwhile, allegations of millions of euros being filtered illegally to ruling party leaders, including Prime Minister Mariano Rajoy, has helped half the conservatives' approval rating putting them level with the opposition Socialists.
That has added an element of political instability that carries faint, but nonetheless unwelcome, echoes of events in fellow euro zone struggler Italy, where a shaky coalition government could fall if former prime minister Silvio Berlusconi loses a supreme court appeal hearing that began on Tuesday.
But the centre-right People's Party of Rajoy, who has denied wrongdoing, has a strong majority in parliament and unless new evidence ties him directly to the scandal, he is expected to remain in power.
Rajoy, along with his economy minister, has recently done his best to talk up the economy, and the second quarter also saw the first drop in unemployment in two years, to 26.3%.
But that lower figure still more than double the euro zone average was largely due to temporary factors especially strong trade data, which includes seasonal tourism.
Spanish retail sales due on Wednesday are expected to show high-street spending has shrunk every month for three years.
Spain's high reliance on activity beyond its borders exports rose to a third of economic activity in the first quarter adds uncertainty to the outlook amid a shaky global recovery and enduring weakness in Europe, where around 70 percent of Spain's exports are sold.
Martin van Vliet, analyst at ING, said he expected Spain's economy to flatline and then gradually return to growth in the first half of next year. "But the pace of growth will probably be too slow to create jobs, which is a prerequisite to embark on a self-sustaining recovery," he said.
