Egypt: Macroeconomic Country Outlook
- GlobalData forecasts Egypt’s real GDP to grow by 5.3% in 2022
- Egypt was ranked 85th out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the country’s services sector grew by 8.1% in 2021
In April 2021, the government launched the second phase of the National Program for Economic Restructural Reforms to boost three sectors, namely technology-intensive transformative industries, agriculture, and ICT, to push economic growth. In January 2022, according to the chief executive of the Sovereign Fund of Egypt, the country aims to double its $1 billion investment portfolio by focusing on entering new sectors and championing green initiatives. The nation is expected to continue as a major FDI destination in the African region, providing impetus to the ongoing reforms, development and economic growth initiatives since Egypt remained committed to improving the country’s investment climate in 2022.
Key findings
- Measures taken by the government in response to adverse global developments: In March 2022, the government announced a mitigation package worth EGP130 billion ($8.3 billion) to alleviate the impact of rising prices. Moreover, the country issued a Samurai bond worth $500 million in March 2022. Additionally, the government introduced a National Structural Reform Program (NSRP) (FY2021–22 and FY2023 – 24), which seeks to improve the standard of living and service delivery to all Egyptians without discrimination. According to GlobalData, the economy expanded by 3.3% in 2021 and is forecast to grow by 5.3% in 2022.
- Ties among Egypt and Israel: In May 2022, Egypt and Israel proposed a plan to strengthen economic ties and increase bilateral trade (excluding tourism and natural gas exports) to $700 million by 2025, compared to $300 million in 2021. Both the nations announced to develop the Nitzana crossing for commercial trade, R&D cooperation, development of joint projects in the area of green energy along with increasing number of direct flights among both the nations. In June 2022, Egypt and Israel signed a memorandum of understanding to boost natural gas exports to Europe.
- Digital transformation: In May 2022, the Egyptian government anticipated a plan to launch a series of smart industrial zones near Cairo, which aims at developing projects related to artificial intelligence technology and encourage the development of industrial automation. The United Nations is expected to provide EUR1.5 million ($1.8 million) to implement the project as well as advice and technical assistance for proper functioning of technologies. In 2021, the Minister of Planning and Economic Development of Egypt announced the communications and information technology sector of the country would achieve the target to contribute 5% to GDP by 2025. Moreover, in 2021, Egypt introduced an ICT 2030 strategy for the development of ICT infrastructure, digital inclusion, building capacities and encouraging innovation in the country by 2030.
- Egypt ranked 114th out of 190 countries in World Bank’s 2020 Ease of Doing Business report: According to the World Bank Doing Business Report (2020), the country scored 60.1 out of 100. It takes five procedures to start a business in Egypt as compared to an average of 6.5 procedures for the Middle East and North African nations. It takes 20 procedures to get a construction permit in Egypt as compared to 15.7 procedures in the Middle East and North African nations. The country was ranked 67th in getting credit and 57th in protecting minority investors out of 190 countries.
- Egypt’s stance on Russia’s invasion of Ukraine and impact on the country: Egypt urged Russia and Ukraine to use diplomacy to find a political solution to the conflict. In March 2022, Egypt voted with 140 other members on a United Nations General Assembly resolution, which called Russia for immediate withdrawal of its forces from Ukraine. However, Egypt refused to impose economic sanctions on Russia. Russia’s invasion of Ukraine is expected to have a major impact on economy and foreign policy of Egypt since the country is one of the largest importers of wheat with a significant reliance on Russian and Ukrainian supplies.
- Step toward renewable energy in the country: In December 2021, the UAE-based Al Nowais Investments company announced to invest $1 billion for renewable energy project in Egypt. In May 2022, the government allocated 5,200 square kilometers (sq km) of land in the areas of Zafarana, Gulf of Suez, East Nile, West Nile, Aswan and Benban for renewable energy development in the country with a production capacity of 10,000MW of renewable energy by 2023. In June 2022, ACWA Power, a leading Saudi developer signed a project agreement with Egypt to develop a 1.1GW wind project in Egypt, at an investment value of $1.5 billion. The project is expected to mitigate the impact of 2.4 million tonnes of CO2 emissions per year and would also provide electricity to 1.1 million households in the country. The plant will be commercially operational by the end of 2026.
Key fundamentals
Sectoral outlook
- Revival of travel and tourism industry: In May 2022, the government announced to launch a project ‘Great Transfiguration’ with an investment of EGP4 billion ($254.9 million) to boost tourism industry of Egypt. In June 2022, the Egyptian authorities began a campaign to clear the river Nile of houseboats to transform the bank into an area for tourists. In July 2022, the country offered nearly 270,000 square meters of land for projects in housing and tourism, which include 10% of land for tourism, commercial and amusement. According to the World Economic Forum, Travel and Tourism Development Index (2021), Egypt secured 51st rank among 117 economies as compared to 57th rank in the previous year. According to the World Travel and Tourism Council, in 2021, travel and tourism contributed 5.1% to GDP and the sector created 2.2 million jobs, which is equivalent to 8% of total jobs. According to GlobalData, international arrival in the country increased from 3.6 million in 2020 to 4.8 million in 2021. Further, international arrivals to the country is forecast to reach 7.9 million in 2022 and 9.7 million in 2023.
- Positive outlook for construction sector: Investments in the construction sector will support long-term economic growth through improved connectivity and help the country overcome the socioeconomic impact of ongoing crisis. In Q1 2022, the country started construction of the Qatari Diar - New Cairo City Gate Development located in Cairo (CITY) with a project value of $12 billion. The project is expected to complete by Q4 2026. In Q1 2022, Egypt initiated development of the AARED/HPD – Gardenia City with investment of $1.6 billion with an estimated completion in Q4 2027. In July 2022, Egypt allocated EGP1.1 billion ($70.1 million) to complete installation of 13 industrial complexes across the nation to provide a stimulating infrastructure for owners of small, medium and micro enterprises along with new job opportunities. According to a report published by the Ministry of Planning and Economic Development, the country aims to invest an estimated amount of EGP240.7 billion ($15.3 billion) on the transport sector during the period 2022–23. According to GlobalData, the construction sector expanded by 6.3% in 2021 and is forecast to grow by 6.4% in 2022 and 6.5% in 2023.
- Steps to boost agriculture sector of the country: In May 2022, according to authorities, Egypt aims to increase wheat production from 45% of total consumption in 2020 to 65% of total consumption by 2025. Additionally, the country also aims to raise oil seeds production to meet 10% of its consumption by 2025, compared to 3% in 2020. In July 2022, Egypt’s Ministry of Planning aimed to invest EGP82.9 billion ($5.3 billion) in the agricultural sector during 2022–23, compared to EGP62.9 billion ($4 billion) in 2021–22. Moreover, the ministry also seeks to increase agricultural production from EGP1.2 trillion ($76.5 billion) in 2021–22 to EGP1.4 trillion ($89.2 billion) in 2022–23, since agriculture is the main source of income and employment for majority of the population in Egypt.
GlobalData Country Risk Index (GCRI) – Q2 2022
Egypt was ranked 85th out of 152 nations in the GCRI Q2 2022. The country’s score is in the manageable risk nations band (40–50). Egypt’s overall risk score (47.6) was higher than the Middle East and North Africa (36.3) and the world average (44.0) in GCRI Q2 2022. The country has an unstable internal political environment. Ongoing civil wars in neighboring countries pose downside risks. However, the country’s macroeconomic outlook is stable due to strong initiatives to implement structural reforms by the government.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources, and proprietary data from GlobalData. Middle East and North Africa nations in this publication include Iran, Egypt, Morocco, Saudi Arabia, Israel, and the United Arab Emirates.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Egypt
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