Country Profile Egypt

Egypt

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Egypt – February 2022

 

Egypt performs similarly to other Middle Eastern countries on measures of growth, creditworthiness and business climate. But per capita incomes lag significantly behind peers such as Saudi Arabia, UAE and Qatar. Beyond the COVID-19 pandemic, the economic outlook is supported by production and investment in extractive industries. Ongoing support from the IMF will facilitate continued economic and fiscal reforms that enhances the business environment and encourages investment.

Egypt At A Glance

The above chart is a cobweb diagram showing how a country measures up on four important dimensions of economic performance—per capita income, annual GDP growth, business climate rank and creditworthiness. Per capita income is in current US dollars. Annual GDP growth is the five-year average forecast between 2022 and 2026. Business climate is measured by the World Bank’s latest Ease of Doing Business ranking of 190 countries. Creditworthiness attempts to measure a country's ability to honour its external debt obligations and is measured by its OECD country credit risk rating. The chart shows not only how a country performs on the four dimensions, but how it measures up against other countries in the region.

Economic Outlook

 

After a successful IMF Program that concluded in 2019, Egypt was widely expected to be one of the fastest growing emerging economies in its neighbourhood. Egypt was one of the few countries in the region that avoided negative growth in 2020 and grew at 3.6%. However, the COVID-19 pandemic, trade disruptions and domestic issues have created significant challenges for the economy.

 

Real GPD Growth (1)

The IMF expects the economy to grow 5.8% per annum in coming years. Reforms across economic and energy sectors have helped the country weather the impact of the pandemic, but long-standing structural issues such as a high debt-to-GDP ratio (around 90), unemployment and inequality remain. The government launched the National Structural Reform Program in 2021 to undertake reforms across the economy and is targeted towards improving the standard of living and developing human capital. In February 2022, the country’s Minister of Finance announced that the government aims to bring the debt-to-GDP ratio to below 90% by June this year. Per capita GDP is expected to rise modestly from $4,180 in 2022 to $5,330 in 2026 by IMF estimates.

 

Per Capita GDP

Country Risk

 

Country risk in Egypt is high. The OECD has a country risk grade of 5, akin to a speculative grade sovereign credit rating. This indicates an elevated risk of Egypt being unable and/or unwilling to meet its external debt obligations.

Risk Ratings

Egypt is ranked 114th out of 190 countries on the World Bank’s latest ease of doing business scorecard. Businesses find it difficult to enforce contracts, trade across borders, pay taxes and register property when compared to the rest of the Middle East. The military’s role in the economy has continued to expand in recent years, dampening private sector business confidence. In addition, Egypt has a complex regulatory and operating environment, which can make it challenging for foreign companies to do business. On the plus side, getting credit, protecting minority investors, dealing with construction permits and getting electricity is somewhat easier in Egypt than other Middle Eastern countries.

Ease Of Doing Business

The risk of expropriation in Egypt is moderate to high. This stems from large delays in the legal system to resolve cases, making it difficult for private enterprise to seek recourse from the government. Notably, the 2017 investment law provides guarantees against full or partial expropriation. But corruption is perceived as high and widespread.

Egypt Expropriation Risk

Egypt underperforms most of the Middle East and North Africa region on the various measures of governance. Voice and accountability, regulatory quality and political stability are particularly weak. Egypt’s governance scores improved in all categories except control of corruption in 2019. Policy efforts to reform the economy, strengthen state-owned enterprises and solid GDP growth prospects beyond the pandemic could sow the seeds for stronger governance.

Governance Indicators

Political risk is elevated, but has improved following the domestic crisis that plagued the first half of the 2010s. Still, tight government control of political discourse, increasing poverty and rising costs of living, exacerbated most recently by the COVID-19 pandemic, increase risks of social unrest and political instability.

Egypt Political Risk

Bilateral Relations

 In 2020, total bilateral goods trade between our two countries amounted to $616 million.

Main Australian goods exports to Egypt were vegetables, wheat, and meat. Goods imports from Egypt in 2020 included fruit and nuts, cereal preparations and vegetables.

Pre-pandemic, Egypt imported about 40% of its food demand and this rose to about 65% in light of the pandemic. The country is the world’s largest importer of wheat. The country’s population is expected to cross the 113 million mark by 2026 and presents great opportunities for Australian exporters in the agriculture and food sectors. Opportunities also exist for Australian companies to provide training programs and equipment for modern irrigation techniques in agriculture production.

Services trade between Australia and Egypt is small. In 2020, only about 200 Egyptian students were enrolled in Australian universities. The Egyptian government’s efforts to reform and improve the education system includes an explicit agenda to attract foreign institutions; this may provide opportunities for Australian providers to open branch campuses, or deliver Australian content through curriculum licencing or fly in/fly out teaching programs. Egypt’s initiatives to improve public administration and ICT capabilities may also create opportunities for Australian technology and vocational institutions. Moreover, many upper-and middle-class Egyptians send their children abroad to study, offering opportunities for Australian education institutions to attract Egyptian students.

Egypt Student Enrolments

Bilateral investment between Australia and Egypt is very small. FDI flows are primarily concentrated in the oil and gas sector. An Australian company, Centamin, manages Egypt’s only gold mine, while a number of other companies have exploration or development concessions, or mining equipment, training and services interests. Worley Parsons won a contract to advise Egypt on the construction of its first nuclear power plant. Egypt’s vast mineral wealth may present further investment opportunities for Australian firms.

Egypt Investment In Australia