Egypt’s Economy in a year

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2017 witnessed a radical change in the structure of the Egyptian economy and a reorganization of all its elements. Starting with the budget, balance of payments, trade balance, investment and tourism budgets, as well as, utilizing the mechanism of the banking system to serve the national economy, in light of planning a new structure of the state's public spending, mainly through restructuring government subsidies, capital investment in national projects and the State’s strategic targeting for growth, employment, improving services, etc.

 

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On two parts, we will first discuss what has been going on in the economy over the last 3 years of restoring control and stability, and second, the launch of the radical reform towards the future ... tackling opportunities and challenges

 

Part I: From 2014 until now

 

The first phase of the reforms: the stage of pulse-sensing procedures after restoration of relative stability (July 2014 - September 2016)

- July 2014, reducing fuel subsidies by up to 78%.

- July 2014, cutting electricity subsidies by 30%.

-February 2016, Customs increase on 500 non-essential commodities by up to 40%.

- March 2016, reducing exchange rate to EGP.8.80 to the US dollar.

- September 2016, Adoption of VAT law instead of sales tax and raising it to 13% instead of 10%.

The second phase of the reforms: the stage of harsh measures and radical reform (November 2016 - December 2016)

- 1st November 2016, the first meeting of the Supreme Investment Council held, headed by the President Abdel Fattah Al-Sisi and its famous 17 decisions taken to facilitate the flow of investors' funds into Egypt.

- 3rd November 2016, officially releasing exchange rate

- 3rd November 2016, cutting Fuel subsidies between 7% and 87% as part of a plan to reorganize government expenditures.

- 3rd November 2016, raising the interest rate 300 basis points in order to support the Egyptian pound, stop the bleeding of its purchasing power and curb inflation as much as possible.

- 3rd November 2016, Governmental banks announce new deposit certificates with 16% and 20% to absorb foreign liquidity in the black market.

- 3rd November 2016, Adoption of the civil service law to reform the administrative apparatus of the state.

- 11th November 2016, The Executive Board of the International Monetary Fund approves a loan to Egypt for $12 billion over 3 years.

- 16th November 2016, receipt of the first tranche of the IMF loan worth $2.7 billion.

- December 2016, increasing customs of 364 non-essential commodities by up to 60%.

 

Phase III: Stage of anticipation and waiting for results (January 2017 - Dec 2017)

- Payment of $21 billion between November 2016 and its counterpart in 2017 without causing any disruption to the monetary system.

- Industrial production achieves its highest growth in 7 years for more than 50% instead of a 25% contraction in 2011

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- A decline in the ratio of domestic public debt for the first time in 7 years to 91.1% instead of 96.7%.

- A reduction in the ratio of net domestic public debt for the first time in seven years to 77.4% instead of 84.4% (separating us only 17% away from the global safety rate of 60%).

- A historic decline and an unprecedented improvement of the trade balance deficit to nearly half (more than a $25 billion improvement).

- Combatting dollarization with the success of the banking system restoration of $56 billion either idle savings and the black market into the banking system and the official market for foreign currency in only 10 months (an amount equivalent to 80% of the state’s budget).

- PMI index (A world index measuring conditions of the private sector) announced for the first time in 25 months, the Egyptian economy has emerged from contraction to growth by 50.7 points.

- With a positive outlook from Standard & Poor's (A credit rating that measures the extent to which a country can repay its debt) and after being negative in May 2016 due to the deterioration of the economy after the fall of the Russian plane and deepened crisis of foreign currency, became stable thanks to the liberalization of the exchange rate in November 3, 2016 and finally positive on 10th November 2017 for the first time in two years.

- Foreign investments in government debt instruments, which is the most important indicator showing the degree of confidence of foreigners in the economy, returns to pre-2011 levels.

- Foreigners' holdings of Egyptian debt instruments increased from almost zero% in the wake of the January 2011 revolution, and at 1% before the exchange rate’s liberalization at the end of 2016, has progressed in big leaps from 6%, to 12%, to 20% and to 33% from November 2016 up to September 2017.

Which confirms the restoration of confidence of international institutions for financing and investment in the Egyptian market thanks to the liberalization of the exchange rate and the seriousness of reforms and restructuring the economy to launch its real capabilities

- Unemployment is also at its best levels since 2011, at less than 12% instead of 13.5% in 2014.

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- Expectations of a decline in unemployment to 5.3% over 4 years by 2022.

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- Budget deficit is shrinking to its lowest figures in 5 years at 10.9% and continues to decline, instead of 13.5% in 2013/2014.