Egypt: Year in Review 2012
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. However, some are still holding off, waiting for greater political stability and a return to the high growth rates needed to generate real income rises and jobs for ordinary Egyptians.
The IMF forecast 2% growth for Egypt in 2012, according to its assessment in October, which upgraded its expectation from 1.5%. The rate is respectable, given the recent political turmoil and the difficult global economic situation, particularly the crisis in the eurozone, a major trading partner, and rising prices of oil imports, which have put a squeeze on the economy. The average growth rate for all net oil importing countries in the region is expected to be lower. Nonetheless, after several years of 5%-plus growth, the past two years have seen a significant slowdown and are still below what is needed to improve performance on socioeconomic indicators.
In 2013, the IMF expects growth to pick up to 3%, in part due to improved political stability. The Egyptian government is somewhat more optimistic. On November 13, Prime Minister Hisham Kandil said that he expected 3.5% growth in the 2012-13 fiscal year (which runs from July 2012 to the end of June 2013), and 4.5% in 2013-14. The 2012-13 budget had foreseen 4%-4.5% growth, which was regarded as on the high side by economists, the international press reported. However, Kandil said he is confident that growth can be ramped up to 7% in the next four years.
In an interview with press, Kandil fleshed out economic plans being drawn up by the government and President Mohammed Morsy, which include reducing the fiscal deficit, currently running at around 8% of GDP, through fewer subsidies and broadening the tax base, which is quite narrow due to Egypt’s large informal economy.