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Euromonitor International’s Egypt Economy, Finance and Trade Country Briefing focuses on the fifth largest and fastest growing economy in the Middle East and North Africa (in US$ terms), which is currently carrying out major economic reforms to help restore its macroeconomic stability. The economy has been able to partially recover from the shock of the Arab Uprising experienced over 2011-2013. Through various reforms, the government has been successful in improving its overall, yet still fragile, fiscal position; as well as thwarting the growth of the currency black market. Furthermore, large infrastructure funding should help not only boost the country’s overall competitiveness, but also create more jobs; thereby increasing consumer spending and the country’s economic potential.
To boost FDI, the government is implementing pro-business reforms. On the fiscal front, the government plans on investing largely in infrastructure, this will boost employment levels; driving wages and consumption in the economy. As per trade sources, the state plans to invest US$2.3 billion during 2015-2020 on building large malls and superstores that will create 40,000 new jobs.
While on the monetary side, in November 2016, Egypt liberalised its exchange rate and scrapped most of the capital controls that did not allow access to foreign currency previously. To rein in the foreign currency black market and combat soaring inflation, the Central Bank of Egypt (CBE), since late 2015, has been continuously raising its key interest rate (overnight deposit rate). In July 2017, it was hiked by 300 basis points to reach 18.75% (the highest in more than two decades). In the same month, the overnight lending rate was also increased from 17.75% to 19.75%.
The shortage in foreign currency persists and might continue to hamper smooth business operations; thereby bringing annual real GDP growth marginally down to 4.0% in 2017. However, with a free-floating currency and further cuts in energy subsidies, the Egyptian economy is expected to become more sustainable. Furthermore, in November 2016, the IMF sanctioned a bailout package worth US$12.0 billion to be released over three years, which should offer additional support to the economy, helping bring about sustainable economic growth.