Turmoil in Egypt to keep economy depressed: WB
Egypt's GDP Growth - Figures according to the World Bank
The report, which was published last month, states that setbacks in political transitions would undermine confidence and delay structural reforms in Egypt.
Rising social and political tensions in the run-up to and after the overthrow of the Morsi-government weighed heavily on confidence in Egypt, and caused investment and industrial output to plummet in the second and third quarters. Since 2011, Egypt has experienced four separate episodes of a sharp deceleration or contraction in activity, as political and social tensions erupted, punctuated by ultimately short-lived rebounds in activity.
Here are the report’s highlights on Egypt:
Egypt’s GDP contracted by 3.2% in Q2/2013, before rebounding to 5.2% in Q3/2013. Growth for the fiscal year ending in Q2/2013 amounted to 2%, down from an already modest 2.3% in 2012.
Fiscal policies remain expansionary, as proven by Egypt’s stimulus package, which amounts to 1.6% of GDP.
Egypt is the developing world’s sixth largest beneficiary in terms of remittances, as it receives about 40% of the region’s remittances. They are three times larger than receipts from the Suez Canal, and are equivalent to about 165% of the country’s official reserves.
Industrial Production in Egypt dropped by 44% in 2013, while exports began to recover starting July 2013.
Balance of Payments (BOP):
Balance of payments pressures eased in 2013, thanks to exceptionally high bilateral borrowing from the Gulf countries, increased exchange rate flexibility, and weak economic activity. Current account deficit also narrowed in response to high inflows of remittances and a smaller non-oil trade deficit.
Wages and Debt:
Public sector wages started to increase by 64% in January 2014. However, there are concerns about debt sustainability due to rising fiscal deficits, that led to a growing public sector debt. 25% of total expenditure in FY 2012 were interest expenditures, as they were pushed to about 8.4% of GDP.