A report published by the Ministry of International Cooperation stated that despite the acts of “violence and terrorism” that Egypt is experiencing, the economy had stabilised by the end of 2013, compared to the state it was in during the first half of the year.
The report, titled “The Egyptian Economy in half a year: Challenges, steps taken and future visions”, analyses the development of the economy before the January 2011 uprising, focusing on four main factors for solid economic policies.
The defined factors included economic growth and increase in GDP, which are in turn accompanied by higher levels of investments and savings and the realisation of social justice. The report indicated that the balance of the financial and monetary policies in the country’s resources and institutional and legal reforms are also prerequisites for economic improvement.
Prior to the 25 January uprising: 2005-2010
The report pointed out that between 2005 and 2010, Egypt witnessed significant economic growth that drove the gross domestic product (GDP) from EGP 643bn to EGP 1206bn. During that period, foreign reserves increased from $23bn to $35.2bn, while foreign direct investment (FDI) reached $13.2bn in 2007, a year which also witnessed a low unemployment rate of 8.4%.
The report mentioned, however, that social policies that should have accompanied the economic prosperity that Egypt witnessed during that period were lacking.
“Poverty rates increased between 2005 and 2010 from 19.6% to 25.2% of the total number of residents,” the report read.
It added that the percentage of expenditure on the health sector was approximately 2% of GDP, which was referred to by the report as “a low percentage”. Meanwhile, expenditure on education deteriorated from 4.9% of GDP in 2005 to 3.6% of GDP in 2010.
The ministerial report stated that the contradiction between the social deterioration and economic growth in Egypt could be viewed as one of the reasons that resulted in the 25 January uprising, adding: “This contradiction was led to the collapse of the social justice and social protection systems as the rewards of economic growth was confined in the hands of the rich.”
The transitional period: 2011-2013
According to the report, the transitional period that followed the ousting of Egypt’s former president Mohamed Hosni Mubarak and ending with the ousting of elected president Mohamed Morsi left the country in an economic predicament.
The report stated that the transitional period led to the deterioration of leading business sectors, such as the industrial, construction and tourism sectors.
“The cost of production increased due to the disturbances in the levels of security and the difficulty in attaining foreign currency to import raw materials needed for production,” the report said.
The report added that during this period, exports decreased, particularly those involving services. GDP dropped in the 2012/2013 fiscal year, which ended in June 2013, registering 2.1% while the unemployment rate surged to 13.7%.
Describing Egypt as being “on the edge of the economic abyss” and the economy as “reaching a critical stage”, the report said that domestic debt had risen to 75% of GDP and poverty rates leapt to 26.3%.
Governmental efforts following 30 June
Discussing the policies the interim government implemented following Morsi’s ouster, the report mentioned that the government had focused on an expansionary plan that, despite the lack of resources and unprecedented budget deficit, sought to “stimulate the economy and make up for the decreased local and foreign investment”.
The ministerial report said that the government also sought to lessen the burden on citizens by undertaking two stimulus plans and signing new petroleum explorations deals with national and international companies.
On how to balance the economic and social growth, the report pointed out that that interim government has begun implementing the projects and economic plans it had constructed. The aim, it said, would be to improve the investment environment and continue financing road infrastructure, initiate national projects such as the development of Suez Canal, and build a social protection network.