Egypt

Egypt’s economy has been in turmoil since a revolt that ousted Hosni Mubarak from his 30-year autocratic rule in 2011, deterring tourists and foreign investors and straining the country’s finances and foreign reserves.

After the ouster of former President Morsi in July last year, the interim government announced two economic stimulus packages. The EGP29.6bn package announced in August 2013 focused on infrastructure-related projects.

Another EGP30bn package was announced in December 2013, of which EGP20bn was directed to development projects, funded by the United Arab Emirates and EGP10bn was to finance the minimum income system and social security programmes. Despite billions of dollars in aid from Gulf states, and two stimulus packages, economic recovery remained slow. According to a report recently published in Saudi Gazette, Egypt’s government is currently working on a new economic stimulus package to boost the sectors that are necessary to spur economic development such as the industries, housing and construction, communication and tourism.

The new package aims to revive and expand the activities of the private sector through removing the ‘bottlenecks’ facing economic key sectors. Egypt’s new president appears to have pulled off a reform that called for reducing subsidies and cutting budget deficits that was long urged by the IMF. The ministry of finance has cut the economic growth target for the fiscal year ending June 2015 to 2-2.5pc from 3-3.5pc and believed that the reforms made to the 2014/2015 state budget aimed to stimulate the economy, boost employment and support social justice.

The government is also working on a three-year economic plan primarily aimed at raising growth rates to 5pc by 2017. The Economist has reported that the country had decent growth rates from 2004 to 2011, driven by real estate rather than productive activity. The World Bank predicts Egypt’s economy to grow by 2.4pc in 2014 followed by a further 2.9pc expansion in 2015.

According to the IMF, growth in Egypt’s economy is expected to remain sluggish this year as political uncertainty is expected to keep tourists and foreign investors away. It expects the economy to grow by 2.3pc and 3.8pc in 2014 and 2015 respectively after expanding by 2.1pc in 2013. The slow performance was likely despite the ‘fiscal stimulus’ and support from Gulf countries of US$17bn since August 2013.

The country is aiming to attract $10bn in foreign direct investment (FDI). FDI to Egypt had reached $13.2bn in 2008 but was hit hard by the political turmoil and due to the cash-strapped government falling behind on its payments to foreign oil firms.

The Egyptian government sees its budget deficit running at 14-14.5pc of GDP in the fiscal year started on July 1. The World Bank sees budget deficit to rise from 11.6pc in 2014 to 12pc of GDP in 2015.

Nigeria

Nigeria

The African Development Bank (AFDB) has predicted a growth of 7.3pc for Nigeria in 2014 and 2015, well above 6.2pc in 2013. The economy has grown by 6.21pc in the first quarter of 2014, up from 4.45pc in the same period last year. The AFDB noted that the progress made in Nigeria so far, were driven by the non-oil sector such as agriculture, information and communication technology, trade and services.

Recent decline in oil production had become worrisome for the government. According to the Bank, growth in oil sector was hampered in 2013 by supply disruptions arising from oil theft, pipeline vandalism and by weak investment in upstream activities with no new oil discovery. Risks to economic growth are sluggish recovery of the global economy, insecurity challenges in the north eastern part of the country, continued agitation for resource control in the Niger Delta and possible distraction from the ongoing reforms as a result of the upcoming 2015 general election. Negative growth of the oil sector may also continue to drag down overall growth

The country is still facing the challenge of making its decade-long sustained growth more inclusive. Poverty and unemployment remain prominent among the major challenges. There is a need to put in place policies that will help address poverty to match the rapid growth, which Nigeria had recorded in recent times, according to Mr Ousmane Dore, the Country Director of the AFDB.

The Finance Minister Ngozi Okonjo-Iweala sees Nigeria’s economy growing at 6.75pc this year even though oil theft has cut official output by 400,000bpd and political turmoil is intensifying ahead of 2015 elections. Nigeria, Africa’s second biggest economy, is drawing increasing foreign investment, but investors are wary of the violence and rampant spending on patronage that often occurs during election cycles.

Meanwhile, Nigeria recently rebased its GDP upwards to $500bn for 2013, ranking the country as the 26th largest economy in the world.Companies such as Guaranty Trust Bank, Zenith Bank and Nigerian Breweries have put Nigeria at the forefront of frontier market opportunities, according to Baring Asset Management. Nigeria represents 13.2pc of the Baring Frontier Markets Fund, the largest single country holding. As a result, the country now boasts of having the largest economy in Africa, surpassing South Africa’s GDP of $352bn.

However, on a per-capita basis, South Africa’s GDP numbers are three times larger than Nigeria’s.

Rebasing its GDP from 1990 to 2010, resulted in an 89pc increase in the estimated size of the economy. But as reported by some agencies, Nigeria’s revised figures will lower its much-praised growth rate of 7pc but also will decrease an already low debt to GDP ratio of 21pc, which should lower interest rates. But 70pc of Nigerians are still living in poverty. Nigeria’s economy needs to grow at about 10pc to address massive poverty and youth unemployment.

Published in Dawn, Economic & Business, August 18th, 2014