Egypt still lags behind other southern Mediterranean countries in several social, economic and business development indicators. Not with standing an historically solid growth recorded (4.2 per cent on average in the last two decades, slightly below the MENA region average of 4.7 per cent), per capita income remains one of the lowest in the region (around US$ 10,900 at Purchasing Power Parity - PPP), unemployment is persistently high (again above 10 per cent since 2011) and a large share of the population continues to live in poverty (more than a quarter below the national poverty line of US$ 569 of annual income per person).

These conditions certainly reflect specific demographic factors, in particular a high rate of population growth, and certain endowment constraints such as limited primary resources and a land where the area easily exploitable for agriculture and habitation is relatively contained. But economic policy factors are seen to play a major role. The country still ranks low in several international classifications (the World Bank Index of Doing Business and Global Competitive Index are among the most quoted) due to the discontinuity in the authorities’ efforts to implement the reform agenda necessary to improve business climate conditions, attract foreign investment, foster trade and develop finance.

In this work we present a preliminary discussion in section 1 on the degree of social, economic and business development achieved by Egypt. We will then show in section 2 the crucial role that a structural reform process, such as that preceding the high growth period of 2004-2008, has had via Foreign Direct Investments and trade on growth and unemployment. That process stopped in the following years, partly due to the adverse external conditions following the 2009 international financial crisis, but also to the prolonged period of political turmoil in Egypt beginning in 2011. It is not by chance that in the period from 2011 to 2014, Gross Domestic Product (GDP) growth fell sharply, unemployment spiked and the convergence process of Egyptian per capita GDP towards advanced countries slightly reversed. 

 

Gianluca Salsecci is Head of Intesa Sanpaolo International Research Network

Giancarlo Frigoli is Senior Economist at the Intesa Sanpaolo Research Department in Milan,

Emil Eskander is Head of Economics Department of Alexbank (ISP Group) in Cairo.