How Egypt can build on its legacy of knowledge and trade for growth

Egypt is at the geographic centre of the MENA region, with a well-documented history that has seen it accumulate knowledge and wealth over millennia. It has leveraged the fertile soils of the Nile Delta and its location along global trade routes through the Mediterranean and the Red Sea, as well as the strategically important Suez Canal, completed in the mid-19th century. This varied history, straddling multiple geopolitical and economic spheres, continues to shape Egypt’s development. It also poses certain challenges, as evidenced by the volatility in global commodity and energy markets in early 2022, which has fuelled inflation and uncertainty.

History

The land Egypt now covers has been inhabited for seven millennia, with Ancient Egyptian civilisation appearing around 3100 BCE. The lands comprising modern-day Egypt were subsequently occupied by the Greeks, beginning from the invasion led by Alexander the Great in 332 BCE, and then the Romans, who arrived in the area around 30 BCE. Throughout antiquity, Egypt was seen as a global centre of knowledge, science, mathematics and development more broadly. Following the Greek and Roman occupations, the Byzantine and Arab periods added another facet to the country’s cultural heritage. This period began with the conquest of Amr ibn Al As between 639 and 642 CE, which brought Egypt a new language, religion and culture through the processes of Arabisation and Islamisation that occurred over the course of subsequent centuries. This period lasted until the 18th century, with the final 500 years from the 13th century onwards seeing the country controlled by Mamluk rulers of the Abbasid caliphate and then the Ottoman Empire.

In 1798 this began to change, following an expedition by Napoleon I, who sought to disrupt British trading routes to India. In addition, he pursued dialogue and cooperation with the local population and religious leaders in a bid to boost scientific enterprise and cooperation. Nonetheless, throughout much of the first half of the 19th century Egypt was ruled by Muhammad Ali, the Ottoman sultan’s viceroy. However, by 1882 the country was under British occupation, which lasted until Egypt gained independence in 1922. The UK’s influence continued over the following decades, but came to a more conclusive end with the ouster of King Farouk in the 1952 revolution led by Gamal Abdel Nasser, who became Egypt’s second president in 1956.

President Nasser nationalised the Suez Canal Company, which had been run by a European concessionary company, to finance the construction of the Aswan High Dam on the Nile River. This led to the 1956 Suez Crisis, which involved joint Franco-British forces occupying the canal, and resulted in the withdrawal of foreign forces by the UN, the US and the Soviet Union. The presidencies of Anwar Sadat (1970-81) and Hosni Mubarak (1981-2011) followed President Nasser’s death in 1970. President Abdel Fattah El Sisi assumed office in 2014.

Population

Egypt’s population is large and rapidly expanding, and is seen as one of the country’s greatest economic assets if it can be harnessed by effective public policy. With a headcount of around 103.5m as of June 2022, according to government data, Egypt is the 14th-most-populous nation in the world, the third largest in Africa and the biggest in the Arab world. Growing by 2% to 2.5% per year, this total is expected to reach up to 160m by 2050.

Demographics

Egypt is also characterised by a bottom-heavy population pyramid. This large youth cohort is economically beneficial in terms of the dependency ratio, and also helps to limit the overall burden on the health care system, as evidenced by the relatively successful navigation of the Covid-19 pandemic. The dependency ratio – which measures dependents under 15 years and over 64 years as a proportion of the working-age population – stood at 64.6% in 2020, according to the World Bank.

However, a large youth population also poses specific policy challenges, especially when it comes to education. This is a particular issue at the primary school level in Egypt, where the number of students in attendance increased by some 40% in the five years between 2011 and 2016.

Although seen as a net positive for the economy overall, these demographic trends make for a competitive labour market for new graduates, with around 700,000 new entrants to the national workforce each year, and high youth unemployment – underscoring the importance of robust job creation.

More broadly, population growth has been driven by a combination of improved health outcomes, which have led to greater life expectancy, and a high, albeit declining, fertility rate. According to World Bank data, the country recorded an average of 3.2 children per woman as of 2020, down from a recent high of 3.4 in 2014 and 6.7 in 1960.

In terms of the country’s geographic distribution, around 40% of Egyptians live in urban areas and 95% of the population lives within 20 km of the Nile River or the Nile Delta. As the population grows, however, this trend is likely to shift, particularly in light of the ongoing New Cities programme, which seeks to reduce overcrowding in existing cities and decentralise the urban population (see Construction & Real Estate chapter). The centrepiece to this development initiative is the New Administrative Capital, which will house government buildings and new residential, commercial and retail complexes to the east of the Greater Cairo area.

Population density stood at 102.8 people per sq km in 2020, according to the latest data from the World Bank, up from 83.1 per sq km in 2010. This, in conjunction with the pace of overall population growth, poses infrastructure challenges that are being targeted by several current government initiatives (see Transport & Logistics chapter).

Language, Religion & Ethnicity

While Arabic is Egypt’s official language, English is also widely spoken in the business community and many middle-class Egyptians have at least a basic command of the language. As the Arab world’s most populous country, Egyptian film and entertainment is dominant in the region, and most foreign films are dubbed in Egyptian Arabic, which is one of the most widely understood Arabic dialects.

Some 90% of the population is Muslim, with the majority identifying as Sunni. The remaining 10% of the population is Christian, comprising Coptic Christians, Maronites, Orthodox Christians and Anglicans. The vast majority of Egyptians – more than 95% – identify as ethnically Egyptian.

Geography

Egypt has an economically advantageous location, straddling the Mediterranean and the Red Sea, and at the confluence of Europe, Africa and Asia. The Suez Canal, completed in 1869, connects the Mediterranean and the Red Sea, and is one of the world’s busiest shipping lanes. It is 193 km long and has more than 50 ships transiting on a daily basis. Israel and the Gaza Strip border Egypt to the north-east, while Libya lies to the west and Sudan to the south. The country’s other prominent topographic asset is the Nile, largely considered the world’s longest river, which begins in central East Africa and runs 850 km before meeting the Mediterranean in its expansive Delta in the north.

According to the Köppen climate classification, Egypt has a hot desert climate, with low levels of rainfall throughout the year. There is a large temperature difference between the summer and winter months, and the country experiences dust storms – known as khamseen – for around 50 days between March and June. Arriving from the north, these storms can reach up to 140 km per hour. While summer temperatures in the desert interior average daytime highs of 43°C, coastal highs are cooler, at around 30°C. In winter, high temperatures range from 18°C in the desert to 14°C on the coast, with lows of 0°C and 7°C, respectively.

The majority of Egypt’s roughly 1m sq km of land area is arid desert. About 38,000 sq km is irrigated, equivalent to 3.8% of the total (see Agriculture chapter). In spite of its size – and compared to many of its neighbours, particularly in the Gulf – Egypt’s natural mineral wealth is relatively sparse. However, investment and exploration in hydrocarbons and gold mining is projected to yield strong returns over the coming years (see Energy & Utilities chapter).