Egyptian Economy and Revoultion

Managerial Economics Research

The Impact of 25th Jan Revolution in Egyptian Economy

Done For: Dr. Ahmed Ghoniem

Done By: Ahmed Hussein

General Overview

Egyptian economy improved dramatically in the 1990s as a result of several arrangements with the International Monetary Fund (IMF) and the move by several, mainly Arab, countries to relieve a large proportion of its debts. These decisions were primarily to reward Egypt for its stand with the U.S.-led coalition against Iraq in the 1990-91 Gulf War. Since that time, Egypt has managed to maintain positive growth rates. Inflation has been kept down, the country's budget deficit decreased, and its foreign reserves increased, while gross domestic product (GDP) has averaged annual growth of 4-5 percent. Despite the slow pace of privatization and new business law enactment mandated by the IMF reform program, the country has succeeded in attracting foreign investment by moving towards a market-based economy. Having successfully stabilized the economy since 1995, the government embarked on a privatization plan in 1997 aimed at expanding the role of the private sector.

In spite of this considerable economic progress, the Egyptian government continues to face serious challenges. Egyptian economic growth has slowed down since 1998, partly due to the economic crisis in Asia, but also as a result of huge government investment in large-scale infrastructure projects. The recession that affected Gulf economies in 1998 and 1999 also impacted Egyptian economy, with lower oil prices causing a drop in remittances —traditionally a major source of foreign currency—sent home by Egyptian workers in the Gulf region. Tourism receipts also fell in reaction to the wave of terrorist acts waged by terrorists in Egypt, thus causing a further decline in the levels of foreign exchange. The government's reluctance to relinquish its shares in state enterprises has further contributed to the slowdown in the Egyptian economy since 1998....