Egypt Economy

While Egypt has a number of appealing long-term fundamentals – including a large and growing population, broad export profile, strong manufacturing base, natural resources and huge potential tourism revenues – the uncertainty over the country’s stability, economic indicators and broader policies has noticeably slowed growth and production over 2013.

Still in a difficult transition period following its revolution, Egypt’s politics are in a state of flux. One of the most persistent challenges over the past two years has been maintaining currency stability, and the intricately linked issue of the depleting foreign currency reserves. The Central Bank of Egypt’s (CBE’s) interventions have helped manage the Egyptian pound’s decline during that time but have also put pressure on foreign exchange reserves. However, emergency measures cannot be a long-term substitute for attracting more investment.

The country’s first full post-revolutionary year has seen the first free presidential elections in Egypt’s long history, and signs of a recovery in GDP growth, but also the teething problems of a young democracy with serious economic challenges ahead. As a large and growing market, strategically located, with some important natural resources, and a tradition of economic liberalisation stretching back several decades, Egypt is an enticing prospect for many investors.

These may be tough times for the Egyptian economy, but healthy long-term fundamentals and sound monetary policy bode well for the future. Indeed, the decision by Egypt’s central bank to keep rates on hold is a clear sign of its policy of prioritising growth in 2012.

Industrial firms in Egypt are beginning to focus their efforts on expanding further afield, as the domestic economy is still somewhat shaky on the back of local political instability and the faltering international economy. Meanwhile, the government is promoting local industry and goods in foreign markets to draw in more foreign currency to support the national economy.

Although a number of Egypt’s other major revenue earners may have suffered following the ouster of former President Mubarak, foreign remittance inflows have weathered the instability fairly well, totalling roughly $14.3bn in 2011, according to the central bank.