CAIRO – 27 August 2019: In an article reviewing the Egyptian economic situation, Financial Times wrote about how Egypt turned to be the economic safe haven for investors and entrepreneurs from being “in an abyss three years ago”.
The article shed light on the achieved progress of the Egyptian economy, stating that it is now being hailed as one of the region’s fastest-growing economies, favored by international bond investors seeking high yields in an increasingly uncertain global environment.
“Three years ago, Egypt’s economy was teetering on the abyss, as entrepreneurs scoured the black market for dollars and foreign investors shunned the country,” it referred.
According to the article, investors lauded the implementation of bold and sensitive reforms by current Egyptian government that former governments balked at.
“The challenge for President Abdel Fatah al-Sisi, a former general who ousted his elected predecessor in 2013, is to turn the country’s macroeconomic improvements into prosperity for its 100m people. Poverty has been rising, official statistics say, and foreign direct investment is paltry outside the oil and gas sector,” it stated.
Financial Times quoted Morgan Stanley chief global strategist Ruchir Sharma, who described Egypt this month as the best reform story in the Middle East, perhaps in any emerging market. “Egypt is on track to become a breakout nation,” he concluded in an upbeat note about the country.
Egyptian officials showed off, according to the article, how they saved their country from an economy collapse and being on more sustainable path with the completion of $12 billion deal with the International Monetary Fund (IMF).
“Economic growth accelerated to 5.6 percent in the fiscal year that ended in June, the highest level since 2010. Debt and the budget deficit, though still hefty, have been on a downward trend. The deficit fell to 8.2 percent of gross domestic product this June down from 12.2 percent three years ago,” the article stated.
In order to create more job opportunities and get rid of its debt, the article advised to unshackle the private sector, upon economists and businessmen opinions. “This requires reforms ranging from cutting the country’s notorious bureaucracy, to improving access to industrial land and reassuring investors about the role and limits of the involvement of the military in the economy,” it elaborated.
As per IMF loan, the article pointed out to the devaluation of the currency, subsidies cut and imposing value added tax, which attracted yields hovering above 17 percent, and foreign debt investors flocked to the country.
“Given the scale of the devaluation of the currency in late 2016 they are not afraid of another one imminently creating low currency risk plus high interest rates,” Africa economist at Citibank, David Cowan told Financial Times.
Meanwhile, it also noted that World Bank report in July warned that “non-oil private sector activity continues to be stifled by a challenging business environment”. The report said that future reforms “should put larger emphasis on levelling the playing field to allow for more private sector participation in the economy, based on fair and transparent rules of competition and economic empowerment”.
Head of macro analysis at EFG-Hermes, a regional investment bank Mohamed Abou Basha, said in the published article that multinationals had shown an appetite for investment in Egypt, but the sums committed are still modest because public consumption has yet to rebound to pre-2016 levels. Inflation, which averaged 21 per cent in the fiscal year to June, had cut deeply into the purchasing power of families, hurting demand. Inflation fell to 8.7 percent in July, its lowest level in four years.
The article also noted that Egypt’s greatest challenge is to create 700,000 job opportunities every year, referring that the number of Egyptians who slipped under a poverty line of $1.45 a day rose to 32.5 per cent of the population in 2018, from 27.8 per cent in 2015, according to Egyptian government figures. “This translates to more than 4m people added to the ranks of the poor."
Financial Times also revised the military agencies in economy stating: “the military has also helped preserve social peace by providing cheap food in poor areas where families have been battered by price increases. In recent years they have expanded in sectors including cement, steel, pharmaceutical, fish farming, medical supplies and real estate.”
Despite the progress achieved by these agencies in Egypt’s economy, Financial Times reviewed Businessmen concern about the role of the military and security agencies in the economy. “Companies are confused about what kind of an economy the state wants,” one local businessman said in the article. “Are we going to the Chinese model where state-owned enterprises are big players? The private sector wants clarity. In China, entrepreneurs know that in some sectors you have to partner with the state, and that others are off limits.”