Egypt protests force European firms to suspend operations

• Egypt’s troubles have already hit economic growth, say experts • BG Group halts drilling and pulls out non-Egyptian staff Several major European companies began to suspend operations in Egypt today as City experts warned that the country’s economic growth has already been damaged by the protests against President Hosni Mubarak . Gas producer BG Group suspended drilling in the country, nearly a week after crowds hit the streets of Cairo. The decision was taken over the weekend, and the company is now withdrawing “non-essential, non-Egyptian” staff from the country. The FTSE 100-listed company is continuing to run its production facilities in Egypt, and monitoring the situation. “We have taken a safety and security decision,” said BG spokesman Neil Burrows, adding that senior management are remaining in the country. French building materials company Lafarge has also halted production at its six cement productions sites in Egypt. The company operates six quarries and three gypsum production sites, as well as more than 60 other plants. Lafarge has also recalled 30 of its Cairo-based expatriate workers, out of a total of 70 expats. Activity at Egypt’s ports also declined today. AP Moller-Maersk, the world’s largest container ship and supply vessel operator, confirmed today that it has suspended its port terminal operations in Egypt, and closed its shipping offices. DP World, the Dubai-based ports operator, also halted operations in Egypt as a “precautionary measures”. “The security of our people remains paramount and we are doing whatever necessary to ensure the safety of all our people,” DP World said in a statement. In banking, Barclays said that it has closed its Egyptian branch network “following advice from the central bank in Egypt”. GDP to suffer Earlier today, rating agency Moody’s cut its rating on Egypt by one notch to Ba2, the second-highest ‘speculative’ or ‘junk’ rating. It warned that Egypt’s public finances could suffer if authorities respond to the crisis by raising wages or increasing subsidies on food and fuel. Credit Suisse believes that the Egyptian economy has already been hurt by the crisis. Analyst Jacqueline Madu said that the biggest immediate danger was a run on Egypt’s banks, once the authorities allow them to open again. “The central bank is unlikely to allow the banks to open, in our view, until some measure of calm is restored by the security forces. Once the situation calms down and the banks reopen, however, we would expect the central bank to provide enough [Egyptian] pound-liquidity to prevent a crisis. However, in so doing, we think the central bank will have to tread a fine line in order not to exacerbate the depreciation pressure on the pound,” Madu said. With tourism unlikely to recover soon, Credit Suisse believes Egypt’s deficit will rise to 8.7% of GDP this year, up from 8.1% last year. This would push Egypt’s national debt up to 76% of GDP. “We expect that fiscal deficit and debt ratios will all deteriorate as growth slows and spending picks up due to the costs of re-building and maintaining security,” said Madu. The country is the world’s biggest importer of wheat and runs a large trade deficit. It is reliant on foreign exchange earnings from tourism, and taxes on ships travelling though the Suez Canal. Egypt BG Financial crisis Global recession Barclays Protest Middle East Graeme Wearden guardian.co.uk

Posted by on January 31, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry