World economies
Egypt
EGYPT’S economy is gradually improving with annual rates of GDP growth reaching 4.3pc in 2015-16. Nevertheless, large spatial disparities exist in terms of education and health outcomes.
Official data indicate that 28pc of the population lives below the poverty line with poverty as high as 60pc in rural upper Egypt.
Inflation has accelerated on the back of the flotation of the Egyptian pound, the scrapping of several subsidies on regulated goods and introduction of a new value-added tax.
The government continues to push reform programme policies forward, aiming to encourage investment to revive the economy.
The reform measures undertaken by the government and the Central Bank of Egypt in 2016 have yielded positive effects. The economy managed to grow at 4.3pc in 2015-16, up from an average of only 2pc during 2010-11 and 2013-14.
The Egyptian economy witnessed several economic fluctuations in 2016, leading the government to take several extreme economic measures. The unemployment rate hit 12.8pc compared to 9pc in 2010.
External debt rose to nearly $60bn up from $35bn in 2010. The gross debt to GDP stood at 100pc. The exports fell to $20bn against imports of $57bn compared to $24bn and $49bn.
During the same period, foreign exchange reserves dropped to $24bn from $38bn. Tourism revenues plummeted $3.4bn from $11bn. The Egyptian pound depreciated from 5.8 to 19 in 2016. Egypt’s economy started the 2017 in much the same way as it had finished 2016.
In January 2017, inflation skyrocketed to the highest level since 1989 as the decision to free float the pound in November and the implementation of the IMF’s conditions under a $12bn rescue plan are reverberating across the economy.
According to the IMF, economic growth in 2016-17 will come in at a relatively weak 2.5pc before accelerating to 4pc in 2017-18. By contrast, the government sees growth targets of 5.2pc and 5pc achievable in respective years as tough economic reforms have restored investor confidence, with dollars coming steadily into the country and international reserves rising to a multi-year high.
Egypt’s fiscal deficit remains relatively large and a key source of imbalance for the economy. According to the IMF, Moody’s and the World Bank, the government’s main focus has to be on reducing the high fiscal deficits through significant monetary and financial policy changes, such as adopting a more flexible exchange rate, introducing the VAT, removing fuel subsides, and containing inflation, which, in turn, will encourage investments and exports.
According to the planning ministry, the reforms being implemented are expected to see fiscal and monetary policy tightened significantly in 2017.
The ministry wants to cut its budget deficit to 9.5pc of GDP in the year to June 2018, down from 12.2pc the previous year. It hopes to cut public debt to 94pc of GDP in the year to June 2018.
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