An emerging economy with structural imbalances
p. 102-103
Texte intégral
| 1952-1966 | 1967-1973 | 1974-1985 | 1991 | November 2016 |
| Socialisation of the economy | War economy | Infitah* policies | Economic reform and structural adjustment programme | Floating of the pound and IMF loan of $12 billion |
1Egypt is an emerging economy with relatively volatile growth. The economy suffers from internal and external structural imbalances such that it is growing but below its potential.
A dominant services sector
2Egyptian growth is primarily based upon the success of the services sector (55% of GDP in 2016), which compensates for the stability of industry (30%) and the shrinking of agriculture (12%). The concentration of labour in the services sector, especially in the public domain, has led to significant overmanning and very low productivity. Agriculture, which represented 36% of total employment for only 11% of GDP in 2015, also experiences modest productivity. Industrial production represents a third of GDP and value added is low in textiles, clothing, chemical and oil products.
6.1 Egyptian GDP: growth and structure (1965-2016)
6.2 Employment structure (by sector)
Exports with low added value
3The structure of industry affects the composition of exports, of which almost 50% are raw materials, hydrocarbons (oil and natural gas) or semi-finished products (fertilizers and chemical products). End-use products include primarily textiles, clothing and agri-foodstuffs. Income linked to services (tourism and the Suez Canal) can be added to the above. Thus the majority of exports are based upon sectors that are vulnerable to international circumstances.
4Egypt’s trading partners are quite stable. The country imports consumer products from China and capital goods from the EU. Arab countries and the EU account for roughly 60% of Egyptian exports. The structure of commercial exchange is imbalanced: Egyptian exports are very dependent on intermediate inputs, imported capital and machinery. And hence, despite the steep devaluation of the Egyptian pound, which has recently lost 50% of its value, exports only grew by 14% between 2016 and 2017.
6.3 Structure of Egyptian exports (2006-2016)
Stationary structural unemployment
5Even during periods of strong economic growth, unemployment has not dropped significantly (especially for women and young people) for three reasons: direct foreign investment (DFI) is focused on capital-intensive sectors and not on labour (building and hydrocarbon), and thus creates little employment: industry does not generates much employment; and lastly, there is a mismatch between the education system and job opportunities. While the mainstream education at all levels produces an excess of graduates, technical training is insufficient leading to youth unemployment (especially amongst the better educated) that reached 32% in 2015.
6.4 Unemployment in Egypt (2001-2015)
The budget: unproductive expenditure
6Egypt is characterised by a structural budget deficit, which reached 10.9% in 2017. This deficit can be explained by the public sector payroll and by the continued rise of interest on the debt. Welfare spending is very modest: expenditure on healthcare and education, which has an impact on human capital, has never exceeded 10%. The majority of public spending is allocated to current expenditure (salaries, subsidies and interest payments), while a small part goes to productive expenditure (education healthcare and infrastructure).
7Egypt’s economic problems are structural. Even if the stabilisation policies implemented in 2016 with the signing of the IMF Structural Adjustment Programme (SAP) were necessary (reduction of petrol subsidy, floating of the pound, implementation of VAT), they are not sufficient. In order to reach the potential growth level, fundamental reforms are required regarding investment policy, competition, promotion of SMEs and the production of high-tech goods.
6.5 State budgetary indicators (2011-2017)
Auteur
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Chahir Zaki
Chahir Zaki, associate professor of economics, director of the francophone section in economics political science, University of Cairo
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