Macroeconomics Condition of Egypt

Macroeconomics Condition of Egypt over the Last 20 Years

Egypt is considered one of the oldest and most economically developed countries in Africa. A few decades ago, it was considered the most successful state. The government tried in every way to stimulate the economy to meet the needs of its population. However, since most of the population was also in poor conditions, in 2011, there was a civil revolution that led to the overthrow of the government (Central Intelligence Agency, 2018). It resulted in a decline in the country’s economy. The next few years of complete political instability ended in new elections in 2014, which resulted in creation of the government with a new president (Central Intelligence Agency, 2018). At the moment, the new state authorities are carrying out a lot of structural reforms to restore the economic power of Egypt. However, many factors say that until now, it has not been possible to overcome all the problems associated with this. It is advisable to consider the macroeconomic indicators of the country and the situation in Egypt over the past 20 years to suggest possible solutions for improving the state of its economy as a whole.

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About Egypt

The history of Egypt began many millennia ago, and it is believed that at that time, one of the most ancient and greatest civilizations in the world was created together with it. In different periods of its existence, it belonged to various states and empires. Only in 1922, the independence of Egypt was proclaimed, and from 1953, it was declared the Arab republic (Central Intelligence Agency, 2018). Egypt is located in Northern Africa in an area of approximately 1,001,450 square kilometers (Central Intelligence Agency, 2018). The country is washed by the waters of the Mediterranean Sea and Red Sea. The capital of the country is Cairo. The current population is 97,041,072 (Central Intelligence Agency, 2018). It is considered one of the most densely populated countries in the Arab world. Egypt has a presidential system of governance that respects individual human rights. The economy is based on activities related to agriculture, production, tourism, and other services (Central Intelligence Agency, 2018). Egypt is an attractive place to attract foreign investment.

Macroeconomic Indicators of Egypt

Egypt is the most economically developed country in North Africa. Nevertheless, at the moment, the main macroeconomic indicators are indicative of economic downturns in the state. Data shows that by 2017, the country’s GDP has significantly decreased to $234 billion comparing with previous years when the GDP was equal to $333 billion (Focus Economics, 2018). Therefore, in percentage terms, the real GDP growth fell to 4.2%. In addition, recent years are characterized by a steady rise in inflation that in 2017, reached a maximum level of 29.5% (Focus Economics, 2018). In Egypt, there is a rather high unemployment rate of 11.8% despite the fact that every year it slightly reduces. The country’s revenues amount to $37.63 billion, while expenditures comprise $58.55 billion (Central Intelligence Agency, 2018). The nation’s greatest problem is the deficit of the budget balance, which is -10.7%. Moreover, in subsequent years, there has been an increase in public debt, which was about 103% of the GDP in 2017. Accordingly, Egypt has a great dependence on imports (Focus Economics, 2018). All these macroeconomic indicators show that there are a number of problems that currently hamper the development of the economy in Egypt.

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Government Actions to Improve the Macroeconomic Situation of Egypt

The main macroeconomic indicators of Egypt lead to the conclusion that in this country, there are several basic problems that affect the successful development of the economy. Among them, there are the deficit of the state budget, the growth of the total debt, the decline in the rate of GDP growth, constant inflation, and high unemployment. All these factors are connected with political threats, political uncertainty, and security risks in the aftermath of the 2011 revolution, which led to a general decline in the economy (Bank Audi Sal, 2017). Therefore, firstly, the government must develop the necessary reforms that would stimulate economic growth in the country, help strengthen the local currency, and combat inflation. Secondly, the state authorities must gain trust of the population and mainly investors, both national and foreign. Egypt needs to increase the level of investment in the country that would give an opportunity to strengthen the economy. Thirdly, the country ought to create comfortable conditions for the development of a business that does not depend on the demand of tourists or one that would replace the imported goods with own ones. Thus, revising its policy, the government can improve the macroeconomic situation in Egypt.

The Situation in Egypt over the Past 20 Years

Twenty years ago, Egypt was a successful prosperous state. Until 2010, the country’s government tried in every possible way to satisfy the demands of its population. Basically, the implementation of economic reforms and constant investment in the communications and infrastructure of the state were made (Central Intelligence Agency, 2018). Nevertheless, most of the population still had poor living conditions and inadequate employment opportunities. Therefore, the opposition groups were formed to conduct the demonstrations and strikes throughout Egypt, which led to the overthrow of the president in 2011 (Central Intelligence Agency, 2018). As a result, the political situation adversely affected the state of the country’s economy. The tourism sector was mainly affected by the decrease in the number of tourists, which negatively influenced the overall demand for goods and services. In addition, after the revolution, the flow of investment into the country decreased (Abdou, & Zaazou, 2013). Data for the period 1992-2017 shows a record decrease of GDP, -3.8%, in 2011 (Trading Economics, 2018). It was the most difficult moment for Egypt, as even during the global economic crisis, the situation in the country was more stable despite some recessions. Since 2014, a new government has been elected. It is led by Abdelfattah Elsisi (Central Intelligence Agency, 2018). The established president is trying to skillfully implement reforms to stabilize the situation in the country.

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The Successes of the New Government

The new government of Egypt is aimed at ensuring a reliable growth of the economy in the country. To this end, the large-scale structural reforms are being implemented that have already positively affected the growth of domestic demand and gross official reserves at this period. The board developed fiscal reforms that involve raising fuel, electricity, customs duties, and the introduction of a new value-added tax (Bank Audi Sal, 2017). It should ensure a greater collection of revenues in the country to reduce the deficit of the state budget. In addition, the new management established the banking system that allowed to increase the state of bank assets and total deposits. It also reduced the volume of non-working loans (Bank Audi Sal, 2017). Thus, the current successful Egyptian government is moving in a new direction that should restore the country’s macroeconomic stability.

Recommendations

In the coming years, Egypt must stabilize its economy to avoid the repetition of the revolution associated with the discontent of the people. As the most important macroeconomic indicators show that there are some problems in the country, and therefore, the government should work hard to improve its situation. At the moment, the situation in Egypt is complicated due to high inflation, reduced investment, unemployment, and a low standard of living. Hence, one of the main tasks facing Egypt should be the conclusion of a formal agreement with the IMF or the EU on assistance and support. It would give a signal and greater confidence in political security both for the population of the country and for attracting national and foreign investments, which is very important at this stage. In addition, the new government should assess the potential and conditions for the development of entrepreneurship and new industries. Such approach would make it possible to increase the availability of jobs and reduce the level of unemployment. Apart from that, it would be advisable to develop reforms that can improve the condition of the poor. For example, it may help regulate prices for socially important goods and their accessibility for residents of the country. Along with the developed programs of the new government, these recommendations would stimulate the revival of the economy in Egypt.

In conclusion, the macroeconomic indicators of Egypt indicate that at the moment, the country’s economy is unstable. It is related to the revolution that took place in 2011. Over the past 20 years, this was the greatest shock for the country that led to the election of the new government. The policy of the current head of state is aimed at restoring and stimulating the economic development for which structural reforms are carried out. Nevertheless, there are still some problems that need resolutions. Therefore, as a recommendation, Egypt must conclude an agreement with the IMF or the EU, assess the potential of the development of businesses and new industries in the country, as well as develop reforms to improve the life of the population.

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