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The development of Egypt began with the appointment of the new cabinet in the middle of 2004 and this is expected to lead to an improvement in policy in total and in financing. Based on conservative assumption for the future, Egypt’s gross domestic product (GDP), which has reached 7.1%, will continue only till next year at 7.3% and will slow down for the following five years. Still, with the conservation assumption, the overall score of Egypt’s business environment will increase to 6.23% from the historical 5.23%.
Due to some indicators, the consumer price inflation will decrease over the next five years to 4.7% in 2012. Budget deficit is expected to decrease over the next five years to 5.1% and the current balance will be kept almost at the same level at 2.3% in 2012. These were some of the measures taken by the government of Egypt last year which should continue in the next five years.
Last year, the import tariff continued to be lower and steps are being taken to move into non-tariff barriers. In the next five years, it is expected that the non-tariff barriers will continue to ease. The monetary policy is moving toward allowing the authorities to employ greater flexibility in the management of currency and this will happen in the next five years.
Economy and policy
The government’s five-year national development plan is ambitious.
It includes an annual real GDP growth of 8%, acknowledging the needs of rapid and sustainable economic growth. Plans include reducing the relatively large tax and raising the standard of living.
The government will continue to push for the economic reform through liberalization and privatization. Measures include sharp reductions in income taxes for a better standard of living and reducing the subsidies on luxury products such as fuel so that the burden will be transferred from the poor to the rich.
Economic growth
The outlook for Egypt’s economic growth is positive. The robust performance of the tourist, construction and real estate sectors is progressing well with the government’s economic reforms providing real capital formation which is the main driver for the country’s economic growth.
Boosted by strong domestic demand, real GDP had accelerated to 7.1% in 2007 from 6.8% a year before. Consequently, the currency performance strengthened and has improved since 2005 from EGP5.7/US$1 to EGP5.4/US$1, and is being traded at around EGP5.35/US$1.
There is no restriction on foreign investment and repatriation of capital. Foreign securities firms are progressing and foreign issuers are treated like domestic firms. The presence of international investment banks, rating companies and institutional investors such as Merrill Lynch is advanced. Capital market laws have been amended as a step toward widening the investor base and stimulating capital market activities. The two stock exchanges in Cairo have been merged and are now called the Egyptian Stock Exchange as a step toward having one regulator.
The turnover of the stock exchange is about EGP2.5 billion (US$450 million), double the activities recorded two years ago. The number of transactions exceeds 48,000 a day, which is 50% higher than what was recorded two years ago.
Foreigners accounted for 32% of the total trading in 2007, double that in the last decade. The market capitalization of the stock exchange stood at US$151 billion as at the end of June 2008, 111% of the GDP of Egypt.
The Islamic market is progressing in the country and Egypt has the capability to penetrate the field. The Egyptian Stock Exchange strives to be a world-class exchange and the premier capital market in the Middle East and North Africa region.
Egypt is eager to compete with other countries for development purposes and the government should provide a level playing field to ensure success.
Before moving to the Egyptian Stock Exchange, Hatem Shafie worked as an assistant general manager with the credit and marketing division in the Egyptian American Bank. The banker of 15 years has also served as senior general manager of corporate finance in an investment company. |
