The economy of Egypt celebrated the election of the Muslim Brotherhood candidate Mohammed Morsi who took over the reigns from Hosni Mubarak on 24th June 2012, after winning the first democratically held election. After the election of the new president, a new constitution was drafted by an Islamist-dominated assembly and was approved in mid-December 2012 by voters. However, President Morsi was deposed in a military-backed coup on 3rd July 2013. The current interim President is Adly Mansour, the head of the Supreme Constitutional Court of Egypt. A new parliament is expected to be formed in 2014, since elections scheduled to be held in 2013 have been postponed to February 2014.
Egypt’s real GDP fell to 2.2% at the end of June 2012, down from 5.1% in 2009/2010 (i.e. before the revolution). The country witnessed long-term political instability due to which the tourism industry was considerably hit. As a result the inflows from Foreign Direct Investment declined. The economic growth of the country remained dismal, hovering around 2% by the mid of the year 2013.
A major currency crisis has also been experienced by the Egyptian economy, with the Egyptian Pound depreciating by about 12.5% of its value since the last rise. As per the estimates, 25.2% of the population was found to survive below the poverty line with an income of less than 1.5 USD per day. The rate of illiteracy stood at 27% and over 3.3 million of the Egyptian population is unemployed, indicating the unemployment rate to be above 18%.
|Year||GDP % Change||Inflation % Change||Year||GDP % Change||Inflation % Change|
Source: World Bank
Despite the political instability engulfing the Egyptian economy, the stock market earned returns of over 45% in the year 2012. Agriculture, construction, telecommunications and real estate were the main sectors contributing towards the GDP. The major share in the GDP was by the agriculture sector approximating to 14.65 of the GDP, with constructions at 4.6%, telecommunications at 4.4% and real estate contributing to 2.9% of the GDP. However, the tourism and manufacturing sectors performed badly with a growth of 0.7% and 2.3% respectively.
Investments reached 39 million USD in 2011-12 with natural gas and crude oil bringing in about 25% of the total investments, followed by Transport and Communication contributing to 19%, and Housing and Real Estate bringing in 16.7% of the investments. Manufacturing and Petroleum Products attracted 8.7% of the investment with the lowest contributors being education and health industry bringing only 2.4% and 1.6% of the investments for the period.
The private sector of the Egyptian Economy contributed 62% of the GDP. In 2012-13, as per the World Economic Forum Global Competitiveness Index, Egypt was ranked 107th�out of a total of 146 economies the world over. There is a lack of competition and fragmentation in the banking sector.� Many efforts were made to privatize state owned financial institutions but results did not bear any fruit as a result of which a huge amount of funds is stacked with these small financial institutions.
One of the most important challenges the Egyptian government is facing is to revamp the public sector. The focus of the Egyptian economy is to transform the public sector to an administratively efficient sector providing great service delivery. A major overhauling is required which allows for a decentralization plan. For a better and bright future, the Egyptian Economy should build sound economic, political and social frameworks giving empowerment to the civil society and private sectors.
Egyptian Economy History
The economy of Egypt showed dramatic improvement in the 90s. The International Monetary Fund provided assistance in various spheres. Major portion of Egypt debts were borne by Arabs. Efforts were put in to keep inflation at the base level. There was a decline in the budget deficit. The foreign reserves of Egypt also increased.
The GDP or the gross domestic product accounted for 4% to 5%. Despite a fairly good progress in the economy of Egypt, there are many snags which Egypt is subjected to. Rate of growth in the economy of Egypt has considerably declined since ’98 owing to the crisis which Asia is facing in terms of economy.
Recession affecting the economies of the Gulf countries between the period ’98 through ’99, affected the economy of Egypt. There was a decrease in the prices of oil consequently decreasing the remittances. Remittance is regarded as an important foreign currency source.
The Egypt economy has recuperated to a considerable extent. The rate of growth in the economy of Egypt accounted for 3.3% in 2001 through 2003. This escalation in growth can be attributed to the increase in trade exports, discoveries of natural gases and their export to other countries, tourism industry.
Unemployment, poverty, financial deficit, domestic debt are some of the threats Egypt is facing. Rate of unemployment accounted for 12% in 2005 September. As many as 600,000 people were required to be recruited every year and it is ascertained that 6% to 7% of the rate of GDP growth cannot be achieved unless unemployment is not attended to.
|Last Updated on : 26th February 2015||Next Update : February 2016|