Country Briefing
In
2014, Egypt entered the fourth year of an unstable polity, amidst
growing civil unrest. Political tensions visibly spilled over affecting
Egypt’s economic growth performance; employment scenario; fiscal
position; and external sector stability. Although the financial
assistance from the Gulf countries helped Egypt overcome temporary
imbalances, structural constraints remain unresolved. Hence, Egypt’s
political and economic structure remains fragile, with downbeat
near-term growth prospects.
EXECUTIVE SUMMARY
§ Egypt’s
economic growth plateaued amidst the ongoing political tensions that
weighed on output. Annual real GDP growth remained subdued at 2.1% in
2013, compared to 2.2% in 2012;
§ The
country continued to grapple with political instability that began in
February 2011. This instability was reflected in Egypt’s dismal ranking
of 188th out of 203 countries in the World Bank’s Political Stability
and Absence of Violence Index in 2012 (latest data available);
§ The
country’s workforce remains discouraged, with the youth unemployment
rate touching 30.2% in 2013. In response to four years of sustained
demonstrations by government workers, the state hiked public sector
minimum wages in January 2014 to EGP1,200 (US$174) per month, from
EGP700 (US$102) per month in 2010. However, given the delay in policy
reforms this increase proved to be insignificant;
§ In
July 2013, the Gulf countries (the UAE, Saudi Arabia and Kuwait)
pledged to support Egypt financially, through an aid package worth
US$16.0 billion. This helped to boost Egypt’s foreign exchange reserves
by 11.4% (year-on-year) in US$ terms in 2013 to US$8.9 billion;
§ Owing
to an expansionary fiscal stance, Egypt’s financial position continued
to deteriorate. In July 2014, the government announced a host of tax
reforms and expenditure cuts, with an aim to lower the budget deficit.
Egypt’s general government budget deficit stood significantly high at
EGP247 billion (US$36.0 billion) or 13.1% of total GDP in 2013;
§ The
country grapples with severe housing shortages. According to the
Ministry of Housing, Utilities and Urban Development, Egypt’s housing
deficit was estimated at 175,000-200,000 new housing units per year in
2013.