Egypt - Global Economics Report

GLEC Assignment Part 2 – Country - Egypt

F-13: Prasoon Verma, Dharmendra Raghuvanshi Dhruv Lakhani, Abhinav Singh

GDP Deflators and CPI:

The growth in the GDP deflator has increased in 2011 with private consumption deflator at 9.1% and government consumption at 8.7%. The average CPI growth is at 10.1% while the Producer Prices are growing at 14.8%. The growth in average wages is 9% but the real growth is negative due to high inflation.

Population and labour Force

The unemployment rate in Egypt has increased to 12.2% in 2011. While the population and the labour force had been increasing steadily in the country, the economy has not been able to generate enough employment opportunities to accommodate the inflow. The primary sectors contributing fuelling the growth in are Financial services and IT, which are not labour intensive, the government, the highest generator of employment, has been struggling for stability, and hence has not been able to create job opportunities.

Current Account Balance:

On account of the weak economic activity, the current account deficit is expected to narrow in 2012 due to the subdued growth in the value of imports and the sluggish repatriation of profits by foreign companies.

The transfer surplus is expected to narrow as remittances from abroad are expected to decline, partly as a result of recession in the EU. The current account balance is expected to turn positive by 2015 due to an increase in export earnings and an increasing services surplus as improving political stability would result in a recovery in the tourism sector. The improving political situation will have another positive benefit that the government’s cost of spending would decline. The export earnings are expected to grow to US$35.2bn in 2016 with import revenue rising to US$66.9bn over the same period. The current-account deficit is expected to average US$669m (0.3% of GDP) over the next forecast period.

Exchange Rates:

Since the beginning of the...