Africa > North Africa > Egypt > Egypt is looking forward to a sizeable boost to its economic performance in 2015.

Egypt: Egypt is looking forward to a sizeable boost to its economic performance in 2015.


With investor confidence growing, Egypt is looking forward to a sizeable boost to its economic performance in 2015.

A peaceful conclusion to presidential elections in June, along with slowing inflationary pressures, a slew of crucial fiscal reforms and rallies on both the EGX and in the tourism sector, have helped pave the way for reasonably robust expansion over the coming 12 months.

Signs of recovery

Egypt posted increase of 2.2% for the fiscal year ending June 2014, in line with tepid activity following the Islamic-led revolution in 2011. However year-on-year increase rose to a provisional 6.8% in the initial quarter of the 2014/15 fiscal year, from 3.7% in the previous quarter. The increase in economic activity is expected to continue, with the IMF and the government forecasting 3.8% increase in this fiscal year.

The outlook has helped sustain the stock market with share prices rallying 32% during the year, making the Egyptian Exchange (EGX) the top Arab stock market in 2014, albeit from a low base.

The encouraging estimate for GDP has as well come about from improved budgetary indicators. Moody’s changed its outlook to stable from negative in October, though refrained from upgrading the credit rating, citing still-weak government finances.

The additional positive outlook on Egypt is closely connected with, part other things, the government's push to pay back debts owed to international oil and gas companies, an issue that had constrained upstream investment in a crucial revenue-generating industry. Egypt's fuel bill rocketed in the wake of the 2011 revolution due to oil being purchased from IOCs and again sold to its own domestic market at subsidised rates, with the bill hitting nearly $7bn at its peak. By November, the outstanding deficit was by presently down to $4.9bn and the government has assured investors the remaining portion will be repaid within six months, with two additional payments totalling additional than $400m being made additional recently.

Egypt’s efforts to make good on outstanding oil debts have helped thaw the investment freeze. In early December, BP announced that it planned to invest $12bn over the next five years and to double its gas supplies to the domestic market in the next decade.

Subsidies in check

An extra source of relief for the economy is the reduction in huge energy subsidies, the Achilles heel of the economy that has been driving up government deficit and deficit, inclunding draining foreign currency reserves. Energy subsidies reached LE128bn ($17.9bn) in 2013/14 – representing about 7% of GDP – from a targeted LE99bn and equal to over 22% of the government’s budget, according to the Minister of Petroleum Sherif Ismail speaking in November.

The government took the initial substantive step in July to rein in subsidy spending with an across-the-board fuel price hike with energy subsidies slashed by about a third, sending a signal to investors that it is critical about structural reform.

Subsidy cuts are as well set to become easier in the coming months, thanks to plummeting world oil prices. With Brent crude trading at 5.5-year lows, Egypt stands to save LE30bn ($4.2bn), or 30% of its fuel subsidy bill originally planned for the 2014/15 fiscal year, provided prices remain at current levels, according to a statement from Ismail at the end of December.

Suez Canal project

Central to the government's plan to kick-start the economy and stimulate increase in labour-intensive sectors – inclunding lower the unemployment rate of 13.1% − is an $8bn project to widen and deepen the Suez Canal. The enlarged transit route is part of a development plan for the whole Suez Canal Zone (SCZ), which comprises 75,000 sq km of land on either side of the canal that is earmarked for industry.

The project, launched in August and to be completed in just one year, aims to cut average transit times from 18 to 11 hours while quadrupling traffic. The government estimates the improvements in the canal will additional than double annual revenues, which currently stand at additional than $5bn.

The Suez project, together with a string of related projects in technology, infrastructure, commerce, tourism and agriculture, is set to improve Egypt’s position as an industrial and logistics centre. Egypt is as well aiming to attract investments worth $10-$12bn over the next four years at a major economic summit in March in areas such as energy, transport, water, grain storage.

The Minister of Tourism, Hisham Zaazou, has as well embarked on an aggressive campaign to revive tourism and expects the sector to return to its pre-revolutionary levels by April 2015. Between July and September, tourism revenues surged 112% year-on-time(y-o-y) to $2bn, while October data showed this upward trend continuing with a 79.5% y-o-y increase in tourist arrivals according to official data. Projections for 2014 put tourism revenues at $7bn, catering to 10m tourists.

Despite challenges on the horizon, such as energy shortages, red tape and a lack of visibility over economic plans tabled by the government, political risks appear to be diminishing. Investors have as well been encouraged by the government’s infrastructure stimulus funded by Gulf money that will help stimulate the economy and boost employment.

Related Articles
  • Year in Review 2017 Egypt

    2018/01/13 Improved performance in Egypt’s key sectors, tighter fiscal management and increased capital inflows drove an economic rebound last year, with increase expected to accelerate further in 2018. Egypt’s economy continued on an upward trajectory in FY 2016/17, posting increase of 4.2%, compared to projections of 3.5%, according to the IMF. Increase in the second half of the year, in particular, accelerated, expanding at an average rate of 4.6% at market prices – the fastest pace since FY 2009/10.
  • Top 10 Most Attractive Investment Destinations In Africa

    2017/08/20 Africa’s feverish increase has decelerated in recent years and a lot of nations have buckled under the pressure of falling resource prices, security disruptions, fiscal imprudence and adverse weather conditions.
  • Africa: Making Things Happen at the Bank - 'Not a Talk Shop' - Akin Adesina

    2017/07/02 Dr. Akinwumi Adesina is focusing on five areas to achieve the African and world goals for a prosperous continent since becoming president of the African Development Bank - Africa's major public financial institution in September 2015. He was a keynote speaker at this month's Corporate Council on Africa's U.S.- Africa Business Summit in Washington D.C. and moderated a lively panel with five African government ministers. He as well received the Gene White Lifetime Succcess Award from the World Child Nutrition Foundation. This week, he was named the 2017 recipient of the World Food Prize, a prestigious honor that includes a $250,000 award. In an interview in Washington, DC, Adesina discussed the Development Bank's ambitious schedule and his vision for attracting the increase capital Africa needs. Posting questions for AllAfrica was Noluthando Crockett-Ntonga.
  • Egypt A balancing act

    2017/05/30 Egypt A balancing act
  • Climate change laws around the world

    2017/05/14 There has been a 20-fold increase in the number of global climate change laws since 1997, according to the most comprehensive database of relevant policy and legislation. The database, produced by the Grantham Research Institute on Climate Change and the Environment and the Sabin Center on Climate Change Law, includes more than 1,200 relevant policies across 164 countries, which account for 95% of global greenhouse gas emissions.