Building capacity to help Africa trade better




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Key Facts

  • Capital: Cairo
  • Region: North Africa
  • Official languages: Arabic
  • Independence Day: February 28, 1922
  • Area: 1,001,000 sq km
  • Population (2018): 98.4 million
  • REC membership: COMESA, CEN-SAD
  • WTO membership: June 30, 1995
  • GDP (2018): US$ 250.895 billion
  • GNI per capita (2018): US$ 2 800
  • Currency: Egyptian pound

Economic overview

Economic growth in the Arab Republic of Egypt, estimated at 5.6% for 2019, is forecast to strengthen to 5.8% in 2020 and 6% in 2021, supported by broad-based economic reform programs since 2016. Other factors supporting growth include the recalibration of government’s social inclusion programs away from general subsidies on energy products to targeted transfers and improvements in the business environment. Tourism, construction, and oil and gas were driving growth. On the demand side, consumption remained subdued as exports and investments were more robust.

A broad-based consolidation plan introduced a new value-added tax and a gradual reduction in energy subsidies, putting the fiscal deficit on a downward trend from 12.5% of GDP in fiscal 2016 to 8.7% in fiscal 2019. Primary balances registered a surplus over the past two years. Debt growth has been contained as the debt-to-GDP ratio fell from 103% in 2017 to 89.5% in 2019, partly a result of fast-growing nominal GDP. The current account deficit narrowed to 2.3% in 2019, and foreign exchange reserves reached an all-time high at $44.96 billion in August 2019. Inflation pressures are also easing, standing at 8.7% year-on-year in July 2019, the lowest in the past four years.

The 2020 fiscal budget assumes an optimistic yet attainable 6% growth rate. In the first quarter of 2019, the unemployment rate dropped to 8.1%, its lowest in 20 years.

Egypt’s prospects are favorable. Real GDP growth is projected to maintain momentum driven by high domestic demand and export growth. Egypt is now a gas exporter, following the discovery of the Zohr field. With growth becoming increasingly inclusive, unemployment declining, pensions improving, and civil servant wages increasing, consumer spending should pick up. The government is advancing Egypt’s integration with the rest of Africa, which should boost exports.

Egypt climbed six ranks to 114 of 190 countries in the latest edition of the World Bank’s Doing Business. The improving business environment should boost domestic investment and further attract foreign direct investment. The decline in inflation is expected to continue. As a result, monetary policy is becoming less restrictive. Cuts in central bank rates would also ease the repayment burden of the government’s large short-term debt.

The 2016 currency depreciation triggered a sharp increase in the cost of living. Despite government social inclusion policies and the positive economic results of the reforms, poverty rose from 27.8% in 2016 to 32.5% in 2019. This increase could further influence government social protection programs. In particular, the main cash transfer programs, Takaful and Karama (Solidarity and Dignity), have been significantly expanded since their introduction in 2016, from 200,000 households to 2.3 million households in 2019. Yet, they only benefit a third of the poor, around 10 million people.

The agricultural and manufacturing sectors, accounting for around 13% and 15% of GDP, remained flat. Private investment, concentrated in real estate and energy, still does not exceed 9% of GDP. And private credit remains subdued, going from 36.2% of total credit in 2011 to 22.7% in 2019. Although net exports became the largest contributor to GDP growth in 2019, non-oil exports remain modest, showing the weak passthrough of currency depreciation. And 60% of debt still carries a maturity of one year or less. While unemployment has been trending down, it is still high among youth (26%) and women (38%).

Last updated: April 2020


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