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Egypt - Overview

Contents extracted from the comprehensive atlas of international trade by Export Entreprises

Introduction

Capital:: Cairo
Area:: 1.001 km2
Total Population:: 80.722
Annual growth rate:: 2.00%
Density:: 81.00/km2
Urban population:: 44%
Population of Cairo (15.546), Alexandria (4.350), Giza (2.600), Subra Al-Haymah (998)
Official language: Classic Arabic is the official language of the State and only about 50% of the population understands it. The Egyptian Arabic (Masri) is the language spoken by the entire population.
Other languages spoken: Armenian, Domari, Nubian and Dongola.
Business language: Egyptian Arabic and English. Some members of the business community also know French and German well.
Ethnic Origins:: The Egyptian population is very homogeneous. More than 99% of the population is of Egyptian origin.
Beliefs: 93.8% of Egyptians are Muslims. The other religions represent 6.2% of the population. The Copts form the main religious minority and the main Christian community of the East.
Telephone codes:
To make a call from: 00
To make a call to: +20
Internet suffix:: .eg
Type of State::
Republic based on the constitution of 1971 revised in 2005. The state has a presidential system of government.
Type of economy::
Lower-middle-income economy; Emerging financial market.
The Egyptian Economy essentially relies on tourism, revenue from the Suez Canal, revenue from private transfers and the export of oil and gas.

Economic overview

In 2011, the Egyptian economy, which had previously shown resilience to the global financial crisis, suffered the effects of the country's political crisis and revolutionary uprising. As a consequence, growth did not exceed 1.8% in 2013 due to the political instability and lack of security which were the result of this crisis. Since the level of FDI remains low and consumption has been weak, the growth prediction for 2014 is 2%.

Since the political crisis that led to the downfall of the regime of Hosni Mubarak, Egypt has entered a period of uncertainty and the future direction of economic policy is unclear. The politics of austerity measures which the government had adopted hoping it would obtain a loan from the IMF led to a rise in social tensions and sparked off numerous strikes. In 2013, after three years of chronic instability, a military coup supported by a large majority of the population led to the destintution of Mohamad Morsi. The announced 8.8 billion EUR in financial aid promised to Egypt by Saudi Arabia, Kuweit and the United Arabic Emirates reassured the markets; however, tourism, the key sector of the Egyptian economy, remains very badly affected by the political instability. The fact that the rating agency Standards & Poors increased the country's rating at the end of 2013 is a proof of this new rise in market confidence. However, the country's economic situation remains worrisome: the budget deficit, the internal and external government debt have increased significantly and the state finances continue to deteriorate. In order to support the economy, the interim government has decided to pursue an expansionist fiscal policy and a policy of public investment in infrastructures. The suppression of energy subsidies has also been announced. The Egypt depends on donors and has been trying to diversify the sources of its financial aid. A far-reaching economic reform is needed and progress must be made in terms of social justice.

The social situation is worrying. The official unemployment rate, which has reached its highest levels of the past 11 years, is close to 13% of the workforce. 75% of all employees work in the illegal economy and 18% of the population lives below the poverty line.

Main industries

Agriculture contributes around 14% of the GDP and employs about a third of the active population. The warm climate and the abundant Nile water allows for several annual harvests. The main crops are cereals, cotton, sugar cane and beets.

Egypt remains a country with little industry. With its diverse natural reserves (gold, minerals, iron, oil and gas), oil and gas-related activities and the secondary sector account for just over a third of the GDP. Egypt is the world’s sixth largest exporter of natural gas.

Finally, the tertiary sector represents around 50 % of the Egyptian GDP and employs 45% of the population. It is largely dominated by revenues from telecommunications and from tourism (the tourist industry brings nearly 10b in annual revenues).

In spite of its economy’s diversification, the country still depends for a large part of its income on the Suez Canal.

Foreign trade overview

Trade represents over 45% of the country's GDP (average for 2010-2012). The Egyptian market is gradually opening up, especially after signing an agreement with the European Free Trade Association (EFTA) in 2006, and promoting a free trade treaty with the United States.

Its three primary export partners are the European Union, which represents more than a third of the trade, United States and Syria. The EU and the USA absorb almost 60% of Egyptian exports. Egypt mainly exports mineral fuels and oil, cotton, iron and steel. It imports mainly consumer electronic goods and capital goods, nuclear reactors and nuclear-powered boilers, cereals, food products and chemical products.

Egypt has a trade deficit. In 2012, the economic slowdown in Europe lead to a weaker demand for Egyptian exports, while the import bill grew due to a rise in the price of grain and raw materials (timber, iron). The deficit therefore deepened in 2012, then diminished in 2013 due to exports rising more quickly than imports. A worsening of the trade balance is expected in the coming years.

FDI

Before the political crisis, the rapid influx of new investments over the past few years made Egypt the largest recipient of FDIs in the Middle East and 3rd in the Arab world, after Saudi Arabia and United Arab Emirates. The dynamic growth of the Egyptian economy (around 7% before the crisis), its strategic geographical position, low labor costs and skilled workforce, a unique tourist potential, substantial energy reserves, large domestic market and the success of reforms undertaken by the authorities (including many privatizations) were all factors that may explain this sharp rise of FDI. The regional context should also be taken into account, as Egypt benefited from abundant liquidity coming from the Gulf countries, as a direct result of the increase in revenues generated by oil exports.

Having dried out due to the global economic crisis and later in 2011 the sociopolitical revolution, FDI inflows recovered in 2012. According to official estimates, FDI flux have risen by 33% in the course of the fiscal year 2012-2013. According to the World Investment Report 2013 published by the UNCTAD, Egypt is the 7th largest recipient of FDI in Africa. FDI comes mainly from the European Union, the United States and the Arab countries. Investments focus primarily on tourism, construction, telecommunications, financial services, energy, and healthcare.
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