Egypt's Economy; A year after the revolution

An Expert's View about Economic Trends/Outlook in Egypt

Posted on: 4 Mar 2012

Cairo, Egypt 19-2-2012, By: Mohamed Buhaisi

The question everybody is asking now; how the economy situation is in Egypt? Is Egypt on the brink of bankruptcy or it awaits a bright future?  Optimists   go as far as to include Egypt in the second wave of emerging countries to achieve high growth rates repeating the Chinese or the Korean model!

Yet, numbers do not lie! Finance numbers given by the government last month draw a very dark picture of the economy. After real GDP rate reached 7% three years ago, it recorded 1.8% in 2011! World Bank expects real GDP to rise to reach 3.8% in 2012 and 5.5% in 2012. Egypt also lost its half hard currency reserve after it reached $36bn in Dec 2010, it is now only $16bn. Account balance recorded deficit of $9.8bn, and it was a credit of $3.4bn just before the revolution. Tourism sector a 9% of GDP recorded the worst number at   -%5.9 when compared to 2009/2010.

The already weak job market is worsening by low GDP rates due to the economic and political climate. Unemployment expected to reach 3 million against 2.7million last year. Private investments decreased from 36bn during first quarter 2010/2011 to le31 for the same period of 2010/2011 at rate of decrease 20%.  Total investments decreased from 56bn to 31 at rate of 18%Total.

Foreign debts increased by 3.9% reaching $34.9. Current account balance recorded -$9.8bn. Gross Government Debt (% of GDP): 74.21 %.   Frequent protest resulted in fleeing of investors & tourist due to instability and violence.  Net FDI recorded for the first time a negative $65 m. during Jan- June 2011

But, some important numbers are panting a positive picture to Egypt’s t economy!  According to a study made by Dr, Heba Nasar,   professor of Economy, some sectors did well during 2010/2011, for example,
Exports of with its strong 16 sectors, kept its upward direction and rose to mark- for the first time- LE 130.76bn approx.USD 22BN. in 2011, an increase of 18.5% compared to 2010 levels with an increase of more the LE 20bn 3.3bn. Imports recorded 8.1% rise when compared with -3.2% last year.
Suez canal revenues recorded a growth of 11.7% of achieved an 11.5% of real GDP.

IT sector recorded 6.7% .Consumer spending which represent 4.7& of the GDP and contribute 4% in the GDP recorded considerable growth as private and public consumption rose 5% and 3.8% respectively. 

Other important numbers also appear as in general revenues which rose by 16.9% to mark LE166bn, Salary tax rose by 14.4% to mark LE7.4bn in the second half of 2011. This increase contributed to income tax revenues to increase generally by 9%, indicating increase in work force salaries in both public and private sectors, it also indicates a strong labor force as there has not been large scale layoffs.
Some major Egyptian companies have been performing much better than analysts predicted. Ezz Steel, the country's biggest steel maker, said its third-quarter net profit jumped to LE128 million (US$21million) from LE1.65million a year earlier because of strong demand for its products.
Commercial International Bank, Egypt's biggest privately owned bank by assets, saw its consolidated net profit fall 20 percent last year because of higher provisions against loan losses — not a disastrous drop during an economic slump..
The outlook for real estate firms, a motor of the economy in the past decade, has brightened since a court ruling late last year ended a dispute over state land bought by Talaat Moustafa Group that had cast doubt over projects across the sector.
A leading property developer, SODIC, says it plans to step up investment this year and the Ministry of Housing is trying to kick-start activity by selling 8,000 plots of land around Cairo to Egyptians living abroad. "We are already seeing some evidence of increased activity" in Cairo's real estate market, said Ayman Sami, head of consultants Jones Lang LaSalle's Egypt office, though he added: "Continued certainty is a basic requirement for the economy to fully rebound."
The IMF has estimated Egypt's gross domestic product growth will pick up only slightly in 2012, to 1.8 percent after 1.2 percent last year and 5.1 percent in 2010. Some economists think the recovery could be much faster, however. HSBC expects GDP to grow 2.7 percent in the current fiscal year to June, accelerating to 3.9 percent next year.

Expert’s prescription for recovery of Egypt‘s Economy;

Dr.  Waleed Helal, president of the Chemicals and fertilizers Exports council, gives other promising numbers and points out that 6 of the top 20 Egypt exports markets of are changing.  For Egyptian exports. South  Africa is now number  5 at about $ 1bn, also exports to turkey rose to  $7bn, doubling 2010 exports  figures and  exports to china is steadily growing .
Mr. Helal explains that these changes assure the ability of Egyptian exports to achieve more growth and thanks to the perception of the Egyptian people after the revolution by the world which projects the seriousness, sprit of freedom, initiative, creation and capability of the Egyptian people.

Mr. Helal added his prescription for the recovery which includes: 
1. Committing to the plan put two years ago to double exports, which has many incentives and contains all procedures needed to achieve target for all exports sectors.
2. Activate the Mercosur agreements with South America.
3. Concentrate efforts to develop the transportations and logistics sectors.
4. Help on building an African commercial body.
5. Maintaining the relationships with Egypt’s’ large Arabic and European markets.
6. Exzerting more efforts to have more commercial advantages with the US markets.

Finally, economical growth and high GDP rates are tied to security, stability, trust of government economical and political policies, changing bankruptcy and exit policies and the end the political vacuum after the election of a president next June.
The password remains security and stability, and once regained, negative number will flip to be positive. This leaves Egypt with the most important challenge which is fair distribution of wealth, but that is another story!



Posted: 04 March 2012

See more from Economic Trends/Outlook in Egypt

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Doing Business in Egypt   By U.S. Commercial Service Egypt
Egypt - Overview   By Hong Kong Trade Development Council (HKTDC)
Egypt's Economy; A year after the revolution   By Buhaisi Consulting International