Egypt Economic Outlook
- Growth should remain depressed, as Egypt has yet to meet its people’s demands for ‘bread, freedom, and social justice’.
- Reforms of the inefficient energy subsidy system and state-owned enterprises are a priority if rising social spending needs are to be met.
- Youth unemployment, at twice the national rate, requires urgent multi-stakeholder intervention.
Following the 25 January 2011 revolution, the first parliamentary elections in modern Egypt were concluded in January 2012, and an elected president should be in office by the middle of the year.
Political actors have declared their commitment to accountability and transparency of public institutions and services, bringing the hope of a new era of economic opportunities. But the revolution has also thrown up several challenges.
Economic growth faltered in 2011 and should only pick up again in 2012/13. Continued political unrest has led to a fall in tourism and foreign direct investment (FDI), both key sources of foreign exchange. As a result, the Central Bank has rapidly depleted its foreign reserves to maintain the exchange rate. The reform of the inefficient energy subsidy system and state-owned enterprises is a priority, to allow for increased spending on education, health, and social safety nets for the very poor. As Egypt strives to meet the short-term demands of the revolution, it will need to lay a foundation for medium to long-term economic reforms that would secure inclusive growth – which was one of the main demands of the revolution.
Egypt must also address human development shortfalls and social inequality, which disproportionately affect women and the rural population. The poor quality of education fails to meet job market needs; the youth unemployment rate is 23%, twice the national average. A National Action Plan on youth, aiming at increasing youth employability, providing job opportunities and developing labour market policies and programmes, has failed to produce results. Most jobs created in Egypt are of poor quality and in the informal sector. Failure to develop a multi-stakeholder solution to this problem could jeopardise all other potential gains from the revolution.
