Egypt flag Egypt: Economic and Political Overview

The economic context of Egypt

Economic Indicators

The Egyptian economy was one of the most resilient and continued growing during the COVID-19 pandemic. The positive trend accelerated in 2022 when GDP was estimated to have grown by 6.7%, although growth decelerated to 4.2% in 2023. The country faced challenges with elevated inflation and imbalances in its balance of payments. Despite these issues, fiscal support has maintained private consumption, which is expected to pick up momentum as inflation eases. Household consumption remained resilient, supported by controls on energy prices, food subsidies, and a series of fiscal packages. On the flip side, business investment has sharply contracted, attributed to heightened financial constraints and increased uncertainty, with a gradual recovery anticipated. The IMF expects growth to reach only 3.6% this year before it picks up to 5% in 2025.

In recent years, Egypt implemented an economic reform program comprising fiscal consolidation measures, the introduction of a floating exchange rate and large cuts in subsidies. The budget for FY 2023/24 anticipates an enhancement in the primary surplus, increasing to 2.5% of GDP from the previous fiscal year's 1.6%. However, the budget deficit was estimated at 4.6% of GDP in 2023, primarily due to elevated debt servicing costs. The government's strategy involves diminishing untargeted energy subsidies and broad-based food subsidies, while simultaneously expanding cash-transfer programs directed towards the most vulnerable. Public investment, including self-financed investments by public entities, is expected to see a substantial increase in FY 2023/24: notably, in October 2023, the government announced hikes in public sector wages and pensions, along with adjustments to personal tax exemptions. Therefore, the latest IMF outlook sees a budget deficit above 10% over the forecast horizon. The public debt-to-GDP ratio increased from 88.5% in 2022 to 92.7% in 2023, although the share in the hands of external lenders only accounts for around one-third of GDP. The exchange rate has shown minimal fluctuation since the beginning of 2023, following a series of devaluations that saw the Egyptian pound lose approximately 50% of its value against the US dollar since early 2022. The authorities continue to oversee the exchange rate and impose restrictions on certain foreign exchange transactions. The OECD invited Egyptian authorities to continue fighting inflation (at 23.5% in 2023) by keeping monetary policy tight and restraining public investment projects that are not urgently needed.

The unemployment rate stood at 7.1% in 2023, according to the IMF estimates, with female unemployment being around four times higher than for males. After a slight uptick to 7.5% this year, it is expected to return around 7.1% by 2025. It is estimated that three-quarters of all employees are paid as unofficial workers, 29.7% of the population lives below the poverty line and 4.5% live in extreme poverty, a ratio that has been decreasing in recent years (CAPMAS – latest data available). Finally, GDP per capita (PPP) was estimated at USD 17,123 in 2023 by the IMF.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 475.23393.91347.59328.85374.25
GDP (Constant Prices, Annual % Change) 6.73.83.04.44.7
GDP per Capita (USD) 4,5873,7283,2252,9913,337
General Government Balance (in % of GDP) -6.1-5.7-6.1-8.3-6.4
General Government Gross Debt (in % of GDP) 88.595.996.482.677.3
Inflation Rate (%) 8.524.432.525.713.1
Unemployment Rate (% of the Labour Force) 7.37.27.17.06.8
Current Account (billions USD) -16.55-4.71-21.81-7.79-8.97
Current Account (in % of GDP) -3.5-1.2-6.3-2.4-2.4

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

Agriculture contributes 10.9% of Egypt’s GDP and employs 20% of the active population (World Bank, latest data available). The sector has historically been important for Egypt, and it accounts for about 20% of total exports and foreign exchange earnings. The country has 3.9 million ha of agricultural land and just 45,000 ha of forests (FAO). The warm climate and the abundant Nile water allow for several annual harvests. The main crops are cereals, cotton, sugar cane and beetroots. The country is also a major producer of long-staple cotton, which is used in the textile industry. According to the latest official governmental figures, Egypt's agricultural exports experienced a 15% surge in the first ten months of 2023, reaching a noteworthy USD 4.3 billion.

Egypt's non-oil industry remains rather limited. With automotive manufacturing, steel, cotton cultivation, textile production and the construction industry, the secondary sector accounts for 32.7% of the GDP and employs 29% of the workforce (World Bank). Overall, the manufacturing sector alone accounts for 16% of GDP, whereas the mining industry accounts for only 0.5%, but is a strategic sector at the centre of the country’s development plan, as the government aims at increasing its share of GDP to 5% over the next two decades (Oxford Business Group). Despite economic diversification efforts, the country continues to depend on the Suez Canal for a large part of its foreign income. The total production of all petroleum products in Egypt reached 74 million tonnes in 2023, including 28 million tons of crude oil and more than 45 million tons of gas, according to a report by the country’s Ministry of Petroleum and Mineral Resources. In the same year, Egypt signed 29 agreements valued at USD 1.2 billion for oil and gas exploration.

Finally, the services sector represents 52.2% of the Egyptian GDP and employs more than half of the population (52%). It is largely dominated by revenues from the telecommunications and tourism sectors. According to official governmental figures, Egypt attracted around 13 million tourists during the first nine months of 2023, with tourism revenues estimated to amount to nearly USD 14 billion by the end of the year, marking a 15% y-o-y increase.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 19.8 29.1 51.1
Value Added (in % of GDP) 10.9 32.7 51.4
Value Added (Annual % Change) 4.0 6.6 6.4

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
55,7/100
World Rank:
130
Regional Rank:
11

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
5.47/10
World Rank:
62/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

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Latest Update: June 2024