Egypt and the African Continental Free Trade Area – challenges and opportunities
Egypt is among Africa’s economic powerhouses which include Nigeria and South Africa. It is the third largest economy by gross domestic product (GDP) and has been experiencing steady growth over the past few years. In 2022, GDP grew by 6.6% thanks to buoyant household consumption (85% of GDP), increased investment (particularly in infrastructure), and continued support from international funding. For 2023, the IMF forecasts growth at 4.4% of GDP amid an increase in natural gas production and favourable world prices, followed by a further acceleration in 2024 (5.2%). The country’s fast-growing economy, its strategic position linking Africa, Europe and the Middle East, and the fact that it is home to the Suez Canal makes it attractive to international investors. However, high global food and fuel prices have had a big impact on Egypt’s external accounts, pressuring the pound and fuelling inflation. Other reasons for Egypt’s recent woes emanate from failed industrial development and export policies which date back decades created a persistent trade deficit.
International trade, which is the focus of this paper, represents about 9% of the country’s GDP and the country has been gradually opening up with the ratification of various free trade agreements, with the latest being the African continental free trade area (AfCFTA) which was ratified by Egypt in 2019. This paper reviews Egypt’s trade, industrial, and investment policies, including the various bilateral and plurilateral agreements that Egypt is party to. This is followed by a look at Egypt’s trade performance outlining its global trade and regional trade profiles. Value chain analysis follows with a focus of Egypt’s its participation in regional value chains emanating from potential opportunities arising from the full implementation of the AfCFTA. Issues that Egypt needs to address to capitalise on the AfCFTA are highlighted and a conclusion follows thereafter.
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