Economy of the Egypt:

Egypt is the third largest economy in the Arab world. Occupying the
northeast corner of the African continent, Egypt is bisected by the
highly fertile Nile valley, where most economic activity takes place.
Egypt's economy was highly centralized during the rule of former
President Gamal Abdel NASSER but opened up considerably under
former Presidents Anwar EL-SADAT and Mohamed Hosni MUBARAK.
Cairo from 2004 to 2008 pursued business climate reforms to attract
foreign investment and facilitate growth. Poor living conditions and
limited job opportunities for the average Egyptian contribute to
public discontent, a major factor leading to the January 2011
revolution that ousted Mubarak. The uncertain political, security, and
policy environment since 2011 caused economic growth to slow
signifi cantly, hurting tourism, manufacturing, and other sectors and
pushing up unemployment.
Weak growth and limited foreign exchange earnings have made
public fi nances unsustainable, leaving authorities dependent on
expensive borrowing for defi cit fi nance and on Gulf allies to help
cover the import bill. In 2015, higher levels of foreign investment
contributed to a slight rebound in GDP growth after a particularly
depressed post-revolution period.

Economic Sector:

The Egyptian economy is one of the Middle East's most versatile economies,
which the sectors of agriculture, industry, tourism and services engaged in
comparable proportions in its basic configuration. The Egyptian economy
depends basically on agriculture, Suez Canal revenues, tourism, taxation,
cultural and media production, petroleum exports and remittances of more
than three million Egyptians abroad, mostly in the Gulf States, the United
States, Europe and Australia.
1) Services are the most important sector of the economy and account for
around 47.5 percent of total GDP.
The most important segments within Services are

(a) Wholesale and Retail Trade (10 percent of the output),

(b)Government (9 percent),
(c) Transportation and Communication (8 percent),
(d) Finance, Insurance and Real Estate (8 percent) and
(e) Tourism (4 percent).
2) Industry constitutes 30 percent of the output and the largest segments
within this sector are:
(a) Manufacturing (15.5 percent)
(b)Extraction (13.5 percent).
3) Agriculture accounts for 14.5 percent of output.
4) Electricity, Water, Sanitation and Construction for around 7 percent.

Basic Economic Condition: (FY 2014-2015)

GDP (Gross Domestic Product) (USD) 996 Billion
GDP per capita (USD) - 3,740
GDP growth rate 4.2%
Export (USD) 22.2 Billion
Import (USD) 61.2 Billion
Exchange Rate of EGP ( vs USD) 7.81
Unemployment rate is 12.8%
The average number of the work force in Egypt is about 26 million.
(according to 2010 estimates)
Population living below the poverty line 20%

Macroeconomic trend:
Egypt has a rather stable mixed economy enjoying average growth,
averaging 3%5% in the past quarter-century. The economy embarked on
various stages of development during which the public and private sectors
played roles varying in relative importance as follows:
There are several stages in the Egyptian economy since 1952. They can be
summarized as follows:
1st Phase - 19521966:
Import substitution and nationalization, for which the first program of
industrialization was launched in 1957, was led by the public sector in heavy
industries such as iron, steel and chemical industries. Nationalization
reduced the relative importance of the private sector.

2nd Phase - 19671973:

Entering the war adversely affected the performance of the economy and
public sector role in import substitution.

3rd Phase - 19741981:

Economic openness was introduced to encourage Arab and foreign
investment through a series of incentives and trade liberalization. The
economy expanded, but this proved unsustainable and growth consequently
slacked.

4th Phase - 19821990:

The economic conference, which was held in February 1982, determined the
development march. During the conference, specialists and experts agreed

on the importance of drawing an ambitious and continuous development

strategy through five-year plans to began in 1982.

5th Phase - 19912007:

Economic reform was introduced to meet the requirements of international
institutions, lenders and donors. The reform included greater incentives to
the private sector in all economic activities.

6th Phase - 2008-2011:

The spillover of the global financial crisis and soaring food prices, especially
of grains, led to calls on the government to provide more immediate
assistance and to strike a "new deal" on agriculture policy and reform. Egypt
faced the long term supply and demand side effects of the global financial
crisis on the national economy. Egypt's gains from annual growth rates
benefited the rich, and failed to reduce poverty, which increased to some
50% in 2011, leading to socioeconomic and political instability and popular
Revolution on January 25, 2011.

7th Phase - 2012:

Egypt needed to strengthen its economy to exogenous shocks, improve
productivity and competition and invest in human capital through social
protection from a human right-based approach to address market failures
and build good trust in governance. The biggest questions for the new
president-elect and new government are how to address corruption at the
level of the bureaucracy, citizens and parties? How to meet the expectations
of the Egyptian people? And how to bring people from different backgrounds
and different voices to support social accountability during economic and
political transition to an active State?

8th Phase - The urgent plan to activate the economy and

establishment of social justice:
The urgent plan has been approved in 2013/2014 by the cabinet to stimulate
the economy and establish social justice. It was represented by the Ministry
of Planning in coordination with the economic ministerial group of social
justice, which is based on pumping additional funds in the range of 30 billion
pounds to specific activities and projects, the citizens would see their return
on the overall economic and social life, in a time span that does not exceed
nine months. At the same time these activities and projects help establish
rapid and sustainable economic growth and overall social justice.

9th Phase - Socio-economic development plan for 2015-2016:

The Ministry of Planning presented the Social and Economic Development
Plan 2015-2016 in the framework of developing planning system, by working
on a number of key themes that include the preparation of a long-term
strategic framework shared by all sectors of the state, represented in the
government, the private sector and civil society, and they share
responsibilities.
The economic development plan is prepared for each region and social
development plan for each province, which contributes to boosting economic
growth and achieving social justice. The development strategy targeted to
give more room to citizen in direct participation in the plan preparation and
follow-up by the trend towards decentralization.

Annual National Budget (FY- 2015-16):

The issuance of the state budget is one of the most widely anticipated
events during the year as it provides insights on the governments economic
plans and directions. In light of the Presidents approval of the 2015/2016
Fiscal Years (FY2016) budget on the 2ndof July, 2015; a brief analysis on the
current FY 2015/2016 budget is given in the following

Budget in Brief:
Total Expenditure : 864.5 Billion EGP

 Total Revenue: 622.27 Billion EGP

Budget Deficit: 251.09 Billion EGP

Major Objectives of the Budget & Economic Targets

The Egyptian government identifies three major objectives in its 2015-16
budget report:
Creation of job opportunities
Economic and financial stability
Sustainable development and social justice

Macro Economic Targets in FY 2015-16:

The GOE has prepared the new budget in line with short and medium-term
economic plans. The FY2015/2016 budget highlights the following
macroeconomic targets:
Real GDP Growth
Budget Deficit (as a
% of GDP)
Unemployment
Inflation

FY 2014/15
4.2%
10.8%

FY 2015/16
5%
8.9%

12.8%
13%

11.5%
11%

12.8

14

13

10.8
12

11.5
11

10

8.9

8
6

4.2

4
2
0

FY 2014/15
FY 2015/16

Figure -1: Macro Economic Target in FY 2015-16

Public Revenues in the Budget:

The GoE targets to collect EGP 422.3bn of tax revenues, representing 68% of
total revenues and 15% of the GDP. Tax revenues in FY2015/2016 represent a
33% increase than the expected toll in FY2014/2015. As for non-tax
revenues, the GoE estimates that they would reach EGP 200bn in
FY2015/2016. The growth in the Non Tax Revenues on the basis of directing
a larger share of the Suez Canal, Central Bank, public enterprises and
other authorities profits to the state budget. Profits worth EGP 102bn are
expected to be directed to the state budget in FY2016, representing 52% of
the total non-tax revenues.

Other; 8%
Real Estate Tax; 1%

Non-Tax
Revenues
Non-Tax
Non-Tax Revenues; 32%

Income Taxes; 25%

Taxes on international trade

Taxes on goods and services; 4%

Taxes on Goods &

Taxes on goods and services; 30%

Figure 2: Public Revenues in the Budget

Public Expenditure in the Budget:

Other; 6%
Purchase of Goods and Equipment; 5%
Interest Payment; 28%
Public Investment; 9%

Wages; 25%

Subsidies and Social Benefits; 27%

Public expenditure is estimated to increase by 17.4% to reach EGP 864.5bn

on the back of the increase across all of the main expenditure components.
Interest payments, subsidies and public wages still account for more than
80% of total expenditure.

Figure: 3- Public Expenditure FY2016

Subsidies and Social Benefits:

The FY2015/2016 budget targets EGP 231bn to be spent on subsidies and
social benefits, as compared to EGP 200bn in FY2014/2015. Petroleum
subsidies decreased to EGP 61.7bn from EGP 70.2bn in FY2014/20155.
Commodity subsidies increased to EGP 37.8bn, by 19.6%, as the GoE aims to
scale the bread subsidy mechanism nationally. It is expected that 3mn more
Egyptian will benefit from the new mechanism in FY2015/2016, to bring the
total percentage of beneficiaries to 70% of the population. Additionally the
GoE is expanding the cash transfer program through the newly launched
Takafol and Karama programs. The most important social programs are
highlighted in the following Chart of the next page-

Subsidies and Social Benefits (in EGP Billion)

FY2016

109.70

61.70

49.20

37.80

31.10

52.50

25.30

11.40

Figure- 4: Subsidies and Social Benefits (in EGP Billion)

Budget Deficit Trend:

Budget Deficit in Different Regime (in % of GDP)

13.9
9.9

13.8

12.4

10.8

8.9

Budget Deficit in Percentage of GDP

Egypt has a long tradition of deficit budget which is not changed in FY15-16

budget. This fiscal year the deficit in national budget is 251.09 EGP bn. But,
in recent years, especially after the takeover of President El Sisi, there is a
positive reduction is seen in the amount of the deficit. The trend of deficit in
national budget after from the era of Mubarak to El Sisi is summarized and
presented in the following chart in terms of percentage of GDP-