(Wraps in quotes on inflation)
By Alaa Shahine
CAIRO, Feb 8 (Reuters) - Egyptian Finance Minister Youssef Boutros-Ghali said on Sunday his country faces a "serious contraction" in economic growth because of the global financial crisis.
He also said inflation in the most populous Arab country was expected to drop into single digits in the coming months.
"All the interaction with the outside world is coming practically to a standstill. Our exports are dropping, tourism is dropping, Suez Canal receipts are dropping, workers remittances are dropping," he said in a speech at the American University in Cairo.
"And therefore, we are looking at a serious contraction in growth in the Egyptian economy". He did not give a forecast.
Last month, Egypt's trade and industry ministry cut its growth forecast to an annualised rate below 5.2 percent in the first half of 2009 due to "sudden variables".
Boutros-Ghali said forecasters at his ministry predict inflation will fall to single digits "in a matter of a couple of months".
"Therefore, the inflationary pressure has disappeared in the Egyptian economy," he said.
Soaring food prices triggered violent protests in some areas of the country last year, prompting the government to raise public sector salaries by 30 percent and then nudge up fuel prices to finance the wage increase.
Egyptian urban inflation dipped to 18.3 percent in December, an eight-month low, as food prices retreated.
The head of Egypt's statistics agency said late last month that falling global prices for wheat, corn and butter would likely help inflation in Egypt fall for a fifth straight month in January.
Boutros-Ghali's comments add further evidence that the global financial crisis is affecting Egypt, with two of the country's biggest sources of foreign currency -- tourism and the Suez Canal -- already showing signs of faltering.
The country's net foreign reserves fell $680 million in January to $33.43 billion, the central bank said last week.
Prime Minister Ahmed Nazif said in December that the Egyptian government had set its target for economic growth at 5.5 percent for the two years starting July 2008, after 7.2 percent growth in the 2007/8 financial year. (Writing by Alastair Sharp; Editing by Mike Nesbit and Elaine Hardcastle)