Economy of Egypt


Economy of Egypt

Occupying the northeast corner of the African continent, Egypt is bisected by the highly fertile Nile valley, where most economic activity takes place. In the last 30 years, the government has reformed the highly centralized economy it inherited from President Gamel Abdel Nasser. During the 1990s, a series of International Monetary Fund arrangements, coupled with massive external debt relief resulting from Egypt's participation in the Gulf War coalition, helped Egypt improve its macroeconomic performance. The pace of structural reforms, including fiscal, monetary policies, privatization and new business legislations, helped Egypt to move towards a more market-oriented economy and, since the turn of the new millennium, prompted increased foreign investment.

Since 2004, Prime Minister Ahmed Nazif's government implemented several reforms including reducing personal and corporate tax rates, reducing energy subsidies, and privatizing several enterprises. Foreign currency inflows—from tourism, worker remittances, oil revenues, and Suez Canal also significantly improved. The stock market boomed, and GDP grew about 5% per year in 2005–06, and topped 7% in 2007-2008. Despite these achievements, the government has failed to raise living standards for the average Egyptian, and has had to continue providing subsidies for basic necessities, which recently increased significantly due to increased international food and oil prices.

The reform programme is still a work in progress and the government will need to continue its aggressive pursuit of reforms in order to sustain the spike in investment and growth and begin to improve economic conditions for the broader population. Egypt's export sectors—particularly gold and natural gas—have bright prospects.

Macroeconomic trend

Egypt has a stable economy in the Middle East and North Africa enjoying continuous growth, averaging 4%–5% in the past quarter-a-century. The economy embarked on various stages of development during which the public and private sectors played roles varying in relative importance:

*Import substitution and nationalization, 1952–1966, during which the first program of industrialization in 1957 was established and led by the public sector in heavy industries such as iron and steel and chemical industries, and the nationalization which receded the relative importance of the private sector.

*Inter-war, 1967–1973, adversely affected the performance of the economy and public sector role in import substitution.

*Openness euphoria, 1974–1981 during which policies were introduced to encourage Arab and foreign investment through a series of incentives and liberalizing trade and payment; the economy expanded but this proved unsustainable and growth consequently scaled back.
*External debt crisis, 1982–1990, the external debt crisis and Paris Club re-scheduling and debt reduction.

*Economic reform, 1991–2007, reform policies were introduced under the terms of international institutions, lenders and donors, including wider incentives to the role of the private sector in all economic activities.

* The World Food Crisis, 2008–present, soaring food prices, especially for grains, calls for the government to provide more immediate assistance to the population of more than 40% in the "poverty tunnel" and to strike a "new deal" on agriculture policy and reform.

Reform era

. The Government of Egypt tamed inflation bringing it down from double-digit to a single digit. Currently, GDP is rising smartly by 7% per annum due to successful diversification.

Among Arab countries, Egypt's GDP has been for long second only to Saudi Arabia's but stepped back in 2003 to third after Saudi Arabia and United Arab Emirates, and since 2004 to fourth after Saudi Arabia, United Arab Emirates and Algeria. However, the Egyptian economy relies heavily on tourist revenues. The tourism sector suffered tremendously following terrorist attacks on tourists in Luxor in October 1997, Sharm al-Sheikh in July 2005, and the town of Dahab in Red Sea resort in April 2006.

Gross domestic product (GDP) per capita based on purchasing-power-parity (PPP) increased fourfold between 1981 and 2006, from US$ 1355 in 1981, to US$ 2525 in 1991, to US$ 3686 in 2001 and to an estimated US$ 4535 in 2006. Based on national currency, GDP per capita at constant 1999 prices increased from EGP 411 in 1981, to EGP 2098 in 1991, to EGP 5493 in 2001 and to EGP 8708 in 2006. Based on the current US$ prices, GDP per capita increased from US$ 587 in 1981, to US$ 869 in 1991, to US$ 1461 in 2001 and to an estimated US$ 1518 (which translates to less than US$ 130 per month) in 2006. According to the World Bank Country Classification, Egypt has been promoted from the low income category to lower middle income category.

Average wages in 2007 hover around $8–10 per day.

External debt

The gross external debt of Egypt, including the total public and private debt owed to non-residents repayable in foreign currency, goods, or services—based on the Ministry of Finance, the Central Bank of Egypt and The World Factbook—is estimated at US$29,898 million at the end of FY 2007.

To be completed soon:

Notes

References

*cite journal |author= [http://www.cbe.org.eg/ Cantral Bank of Egypt] | title="Economic Bulletin and Annual Report Egypt 2007”
*cite journal | author=Nawar, Abdel-Hameed | title="The Emerging Landscape of the Natural Gas in Egypt" | journal=Cairo University, manuscript | year=2005 | volume=
*cite journal | author=Nawar, Abdel-Hameed | title="From Marina to Kom-Ombo: A Note on Poverty in Egypt" | journal=Cairo University, manuscript | year=2007 | volume= August
*cite journal | author=Nawar, Abdel-Hameed | title=" [http://ssrn.com/abstract=1106416 PPI and Measuring Inflation in Business Transactions in Egypt] " | journal=Cairo University, manuscript | year=2008 | volume=March
*cite journal | author= Ministry of Investment | title="Quarterly report (Second Quarter) financial | year=2005 | pages=21
*cite journal |author= [http://www.oxfordbusinessgroup.com Oxford business group] | title="Emerging Egypt 2007”

ee also

* Egypt
* List of Egyptian companies
* Next Eleven

External links

*dmoz|Regional/Africa/Egypt/Business_and_Economy/Economic_Development
* [http://www.businesstodayegypt.com/ Business Today Egypt] magazine
* [http://www.transparency.org/ Transparency International] website


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