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Characterizing the Egyptian Economy: Is it reasonable to freak out?

Stronger corporate ethics & a horrendous labor efficiency market are key-traits of the Egyptian economy, according to the World Economic Forum.
A frequent statement has been touring the media for a while now: “Egypt’s economy is dreadful.” But how bad is it really and why has it come so far? Most importantly: Is it appropriate to freak out?

The answer is: it depends how one chooses to look at it.

The Global Competitiveness Index 2012-2013 (GCI) analyzed and evaluated Egypt’s economic growth rates and the factors influencing the country’s business-life and financial status. This caused Egypt to drop from place 94 to 107 in the index, while shifting from a factor-driven to efficiency-driven economy.

When talking about what has influenced Egypt’s rank on the Global Competitiveness Report (GCI), the World Economic Forum (WEF) blames the political uncertainty during the transition period, the deteriorating government efficiency, and the security situation.

But also some improvements were recorded, as government favoritism has dropped and corporate ethics have surprisingly increased, indicating positive future developments.

Egypt’s asset is definitely its innovation and sophistication factors, followed by its efficiency enhancers and the basic requirements needed in order to stimulate economic growth and build competition.

Out of the four main basic requirements for economic growth – institutions, infrastructure, macroeconomic environment and health & primary education -, Egypt’s infrastructure was ranked as the country’s highest asset, while the macroeconomic environment ranked remarkably low.

Although the market size was considered as the best efficiency enhancer for Egypt, its impact is dragged down by several factors, especially the labor efficiency market, which is labeled as the third worst in the world, after Algeria and Venezuela.

As Egypt’s GDP is ranked number 44 worldwide, it mainly depends on the services sector, followed by the non-manufacturing industry. Agriculture and the manufacturing industry only amount to 10 and 14 percent of the country’s GDP.

The GCI advises Egypt’s leaders to focus on the macroeconomic environment, put up a credible fiscal consolidation plan, better target subsidies, intensify domestic competition, and make labor markets more flexible, in order to increase employment.

Fact is, that foreign investors do have plans in Egypt, recently proven by the news of an American delegation of investors visiting Cairo this weekend. Yet one question remains: is foreign investment really what Egypt needs, or should it primarily focus on fixing and building its domestic independency?

To download the Global Competitiveness Index 2012 - 2013, please visit: