Egypt

Broad Economic Indicators

Economic overview

The political turmoil and decline in tourism in Egypt since the 2011 uprising brought about a period of economic crisis in the country.[1] Foreign investors either halted their work in Egypt or decreased their investments, which caused a decline in production.[2] At the same time, the decline in tourism and investment resulted in a shortage of foreign currency desperately needed to purchase imports.

The inflation rate, which was at a 9.1% in February 2016[3], climbed to 14% in March 2016[4], and further increased to a high of 25.9% in December 2016.[5] It rose again to a staggering 30.9% in January 2017, recorded as the highest rate in over a decade. This has led to substantial price hikes in food, beverages and fuel, leading to many not being able to afford these necessities.[6]

After the 2013 coup, Gulf States supported Egypt’s economy by providing cash inflow of more than USD25 billion.[7] This support allowed the government to continue to function without complying with economic reforms recommended by the IMF. However, further worsening of the economic situation finally pushed the Egyptian government to reach an agreement with the IMF in late 2016.[8] One of the conditions of this deal was that the country establish a flexible exchange rate regime.

The country’s currency had been fixed to the US dollar adversely affected the country’s economy, by lowering external competitiveness, draining foreign reserves, and creating a foreign exchange crisis.[9] The shortage of foreign currency hurt businesses, whose ability to import was impacted, and led to the emergence of a black market for foreign currency.[10]

Public finances have also been problematic. Low revenues, ill-advised subsidies, and a rising public sector wage bill have led to public debt reaching almost 100% of the country’s GDP. In addition, low economic growth that has failed to generate sufficient employment has prevailed. The IMF believes low growth is largely owing to existing structural issues, among them a difficult business environment and lack of access to finance.[11]

The recent agreement reached with the IMF is a three-year loan worth USD 12 billion tied to an economic reform programme that requires the following measures:

  • A flexible exchange rate regime
  • Monetary tightening to contain inflation
  • Fiscal consolidation to ensure medium-term public debt sustainability
  • Strengthening social safety nets and increasing pro-poor spending to offset the impact of the reforms on the vulnerable, and
  • Structural reforms to promote inclusive growth, create jobs, increase and diversify exports, improve the business environment, and strengthen public finance management.[12]

In early November 2016 the government embarked on long-overdue austerity measures when it floated the Egyptian pound. Within a day, the overvalued currency dropped from E£8.8 to E£14.65 to the USD. The government also announced there were would be further reductions in fuel subsidies of between 30 and 50%.[13] Both steps will likely push already-high inflation up significantly in the short term, but are necessary measures to boost the country’s economy. Unpegging the currency, which was significantly overvalued, will have a positive effect on investment[14], and reducing subsidies will alleviate some of the pressure on government coffers. However, the government still needs to address elevated security risks, sizable fiscal deficits, and high unemployment and inflation rates.[15]

GDP and structure of the economy

The size of Egypt’s economy (GDP) was USD 332.1 billion in 2015, an increase of 217% since 2000.[16] The country’s economy is more than double the size of Algeria’s and more than triple the size of Morocco’s. In current USD, the Egyptian economy was slightly larger than South Africa’s (although this is largely as a result of the artificially high value of the pound to the dollar), and significantly smaller than the Nigerian economy. The Egyptian economy accounts for 11.7% of the total Middle East and North African economy. (See table 2.1 and figure 2.1 below.)

Table 2.1: GDP (current USD billions) (2000–2015) and projected GDP (2016–2020)

  2000 2005 2010 2014 2015 2016 2020
Algeria* 54.7 103.2 161.2 213.5 164.8 160.8 187.6
Egypt 104.8 94.1 230.0 305.6 332.1 332.3
Morocco* 38.9 62.3 93.2 109.9 100.6 103.6 124.3
Nigeria 67.8 169.6 369.1 568.5 493.8 406.0 613.1
South Africa 136.5 257.7 375.3 351.6 314.7 294.1 353.4
Middle East and North Africa 1,088.6 1,397.7 2,568.1 3,208.7 2,840.3 2,807.3 3,511.1
Sub-Saharan Africa 381.8 716.8 1,275.2 1,690.3 1,512.1 1,411.5 1,905.8

Source: IMF, 2017[17]
Note: *estimates after 2015

Figure 2.1
Source: IMF, 2017[18]
Figure 2.1: Regional comparison: GDP (current USD billions) (2000-2015) and projected GDP (2016–2020)

The industry sector was the largest contributor to Egypt’s economy, producing E£ 879,804 billion or 36% of the GDP in 2015. The services sector is the second largest contributor to the country’s economy, and generated E£ 808,931 billion, equivalent to 33.1% of GDP. Agriculture, forestry and fishing only made up 11.2% (E£ 273,717 billion) of total GDP.[19]

Table 2.2: Value added to GDP by sector (2015)

Economic sectors Egyptian Pound (billions) Percentage contribution
Agriculture, forestry and fishing 273,717 11.2%
Industry 879,804 36.0% 
Manufacturing industries 405,687 16.6%
Extractions 312,819 12.8%
Construction and building 117,307 4.8%
Tourism 43,990 1.8%
Services 808,931 33.1% 
Wholesale and retail trade 315,263 12.9%
General government 273,717 11.2%
Social services 114,863 4.7%
Transportation and storage 105,088 4.3%
Other employment sectors 273,717 11.2% 
Total GDP *2,443,900  

Sources: Bank Audi, 2016[20]; *IMF, 2017[21]
Note: Other can include employment sectors from industries or services

The manufacturing industries are the single largest in the economy, accounting for 16.6% of GDP in 2015. Wholesale and retail trade (12.9%) and extractions (12.8%) industries contributed roughly equal shares to Egypt’s GDP. Tourism only accounted for 1.8% of the country’s GDP, down from 2.2% the previous year. With the country’s somewhat unstable security situation and the threat of terrorism this is not surprising.[22] Since the revenue from the tourism industry is an important source of foreign exchange for the country this low share of the total GDP is unsettling.

Figure 2.1
Source: Bank Audi, 2016[23]
Figure 2.2: GDP breakdown by economic activity (2015)

Between 2005 and 2015, the agriculture sector’s contribution to GDP decreased by 24.9%, industry’s contribution decreased by less than 1%, and only the services sector’s contribution to GDP increased, by 7.6%. Over the same period, the services sector has always generated the bulk of the total GDP, followed by industry, while agriculture has accounted for the smallest share of GDP.[24]

Figure 2.1
Source: Statista, 2016[25]
Figure 2.3: Share of GDP from agriculture, industry and services (2005–2015)

Economic growth rate

In 2010, Egypt’s growth rate was 5.1%, but dropped to 2.9% in 2014. This decline was largely due to the political transition, which impacted on the tourism and manufacturing sectors.[26] In 2015 growth rose to 4.4%, but the IMF’s projected figures shows a decline to 4.3% in 2016.[27] The country’s growth in 2015 was slightly lower than Morocco’s, but higher than Algeria’s, Nigeria’s, the Middle East and North African average and significantly higher than South Africa’s growth rate (see table 2.3 and figure 2.4 below).

Table 2.3: Regional comparison: GDP growth rates (%) (2000–2015) and projected (2016–2020)

  2000 2005 2010 2014 2015 2016 2020
Algeria* 3.8 5.9 3.6 3.8 3.8 4.2 1.7
Egypt 5.4 4.5 5.1 2.9 4.4 4.3 5.8
Morocco* 1.9 3.3 3.8 2.6 4.5 1.5 4.4
Nigeria 5.5 7.0 11.3 6.3 2.7 -1.5 5.5
South Africa 4.2 5.3 3.0 1.7 1.3 0.3 4.2
Middle East and North Africa 5.5 5.1 5.0 2.7 2.6 3.8 3.3
Sub-Saharan Africa 4.0 6.4 7.0 5.1 3.4 1.4 3.7

Source: IMF, 2017[28]
Note: *estimates after 2015

Figure 2.1
Source: IMF, 2017[29]
Figure 2.4: Regional comparison: GDP growth rates (%) (2000–2015) and projected (2016–2020)

GDP per capita in USD

Egypt’s GDP per capita (USD 3,731.2 in 2015) showed strong growth between 2000 and 2015, increasing by 127%. In 2015, Egypt’s GDP per capita was below South Africa’s and Algeria’s, but higher than Nigeria’s. At the same time, it was only one fifth of the average GDP per capita in the Middle East and North Africa, which is extremely high due to several oil exporting countries with far smaller populations than Egypt in the region.[30] (See table 2.4 and figure 2.5.)

Table 2.4: Regional comparison: GDP per capita (USD) (2000–2015) and projected (2016–2020)

  2000 2005 2010 2014 2015 2016 2020
South Africa 3042.4 5412.4 7361.9 6492.9 5721.1 5260.9 5925.1
Algeria* 1,794.7 3,141.0 4,480.7 5,458.9 4,123.3 3,944.4 4,276.2
Egypt 1,642.6 1,330.5 2,921.8 3,524.4 3,731.2 3,684.6
Morocco* 1,365.1 2,066.3 2,926.7 3,311.8 3,002.5 3,063.1 3,540.3
Nigeria^ 570.2 1245.1 2365.0 3268.4 2763.2 2210.6 2995.2
Middle East and North Africa 9,986.2 12,553.6 15,310.4 17,605.5 17,843.4 18,402.3 20,782.4
Sub-Saharan Africa 1,923.1 2,500.3 3,220.1 3,768.7 3,835.6 3,837.1 4,302.6

Source: IMF, 2017[31]
Note: *estimates after 2015; ^estimates after 2012

Figure 2.1
Source: IMF, 2017[32]
Figure 2.5: Regional comparison: GDP per capita (USD) (2000–2015) and projected (2016–2020)

Egypt’s CPI – Inflation rate

Egypt’s consumer price inflation rate was 11% in 2015 and is projected to drop slightly to 10.2% in 2016.[33] The 2015 inflation rate was slightly higher than Nigeria’s (9%), more than double Algeria’s (4.8%) and South Africa’s (4.6%), and substantially higher than Morocco’s (1.5%). (See Table 2.5 and Figure 2.6 below.) Contrary to IMF projections for 2016, the inflation rate reached 25.9% in December 2016 and a month later it spiked to 30.9%.[34] Prices rose steeply following the exchange rate reform of November 2016 and the reduction of fuel subsidies. Experts expect inflation to decline again once the effects of the implementation of the IMF-backed reform programme wear off.[35]

Table 2.5: Regional comparison: Inflation rate (%) (2000–2015) and projected (2016–2020)

  2000 2005 2010 2014 2015 2016 2020
Algeria 0.3 1.4 3.9 2.9 4.8 6.4 4.0
Egypt 2.8 8.8 11.7 10.1 11.0 10.2 8.1
Morocco 1.9 1.0 1.0 0.4 1.5 1.6 2.0
Nigeria 6.9 17.9 13.7 8.0 9.0 15.7 15.2
South Africa* 5.4 3.4 4.3 6.1 4.6 6.3 5.5
Middle East and North Africa 2.6 7.2 6.2 6.6 5.9 5.4 5.2
Sub-Saharan Africa 14.7 9.5 8.1 6.3 7.0 11.4 8.0

Source: IMF, 2017[36]
Note: *estimates after 2017

Figure 2.1
Source: IMF, 2017[37]
Figure 2.6: Regional comparison: Inflation rate (%) (2000–2015) and projected (2016–2020)
  • Country Profile
  • Introduction
  • Broad Economic Indicators
  • Currency and Exchange Rate
  • Competitiveness and Ease of Doing Business
  • Foreign Investment and Largest Companies
  • Foreign Aid
  • Country Strategic Framework
  • Summary of Economic Conditions
  • Implications, Challenges and Recommendations
  • Population
  • Living Standards and Poverty Levels
  • Healthcare
  • Implications, Challenges and Recommendations
  • Qualifications Profile of the Population and Workforce
  • Levels of Schooling and Basic Education
  • Technical and Vocational Education and Training
  • Tertiary Education
  • Innovation in Egypt
  • Implications, Challenges and Recommendations
  • Labour Force
  • Employment by Sector
  • Employment by Skill Level
  • Employment by Occupation
  • Labour Productivity
  • Unemployment and Job Creation
  • Expatriates, Immigrants and the Egyptian Diaspora
  • Wage and Salary Trends and Social Insurance
  • Industrial Relations Framework
  • Labour Market Efficiency
  • The Fourth Industrial Revolution
  • Implications, Challenges and Recommendations

Economy

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