The Report: Egypt 2020
With one of the biggest consumer markets in the region and robust fundamentals, Egypt is well placed to attract international investment and emerge from this difficult period in a strong position. Although the Covid-19 pandemic has caused considerable disruption, the government’s ongoing reform efforts have helped to mitigate the worst effects of the crisis.
Country Profile
One of the world’s oldest civilisations, Egypt has long been central to the development of the MENA region and has built an extensive international trade network, benefitting from its location at the crossroads of Europe, Africa and Asia. As the world’s 14th-most populous country and the most populous nation in the Arab world, Egypt also benefits from a large, rapidly expanding population. These underlying fundamentals should help the country to continue on a path to long-term growth, despite the disruption caused by the global Covid-19 pandemic. This chapter contains a viewpoint from President Abdel Fattah El Sisi.
Explore chapterEconomy
Following a currency crisis in 2016, Egypt implemented a series of reforms, the results of which are apparent across key macroeconomic indicators. GDP growth rose from 5.3% in FY 2017/18 to 5.6% in FY 2018/19, and unemployment fell to 7.5%. Although Egypt faces the challenges of 2020 from a relatively robust position, lockdown measures and market turbulence have significantly impacted the economy. In April 2020 the Ministry of Finance downgraded its growth forecast for FY 2020/21 from 4.5% to 3.5%, before reducing this further to 2% in May 2020. Nevertheless, this makes Egypt the only Arab economy expected to experience positive GDP growth in 2020 and one of the few countries worldwide not set to enter recession. While the full impact of the pandemic remains to be seen, the country has moved to mitigate the worst effects by boosting government investment, and supporting small businesses and strategic industries that were adversely affected by the crisis. This chapter contains interviews with Mohamed Maait, Minister of Finance; and Ahmed Abd El Wahab, Executive Director, General Authority for Investment and Free Zones.
Banking
The largest of its kind in North Africa, Egypt’s banking sector has also long been seen as one of the most stable in the region. Since 2010 the industry has overcome the challenges of political revolution, currency crises and an interest rate environment that has acted as a barrier to credit extension. In early 2020 the outlook for the sector was broadly positive, but by the close of the first quarter it became apparent that Covid-19 would have a deleterious effect on the domestic economy. As a result, Egypt’s financial institutions are likely to focus on maintaining their asset quality rather than boosting their lending portfolios. Social distancing, meanwhile, is set to add momentum to the more widespread adoption of online banking and digital payments, which should help to boost financial inclusion. This chapter contains an interview with Hisham Ezz Al Arab, Chairman and Managing Director, Commercial International Bank.
Capital Markets
Despite uncertainty for economies across the region, Egypt’s capital market reform continued apace. Short-term measures implemented in response to the economic effects of Covid-19 joined a series of reforms aimed at establishing the Egyptian Exchange (EGX) as a safer and more transparent destination for investors. While challenging market conditions have reduced the prospects of initial public offering (IPO) activity in 2020, the issuance of non-state IPOs is expected to pick up again as the economy recovers. More IPO momentum may also emerge from Egypt’s rapidly developing private equity and venture capital sphere, as well as the prospect of military companies being listed on the exchange. Although the performance of the EGX is inextricably linked to that of the economy, and the short-term outlook remains uncertain, longer-term prospects for the market are strong – a local investment firm expects Egypt’s market capitalisation to increase from 15% of GDP in 2019 to 20% in 2024. This chapter contains interviews with Mohamed Farid Saleh, Chairman, EGX; and Hussein Choucri, Chairman and Managing Director, HC Securities & Investment.
Insurance
Although Egypt’s insurance sector has shown strong growth over the past decade, it faces a challenging period in FY 2020/21. An ongoing process of regulatory reform promises to strengthen the legislative platform that underpins the industry, but it is likely to result in short-term difficulties for some sections of the market, compounded by the disruption caused by Covid-19. Nevertheless, the sector’s fundamentals support a positive outlook for long-term expansion, and Fitch Ratings forecasts that the life and non-life segments will see average annual growth of 5.9% and 9.9% per year, respectively, between 2020 and 2024. Given that premium as a percentage of GDP is less than 1%, the regulatory shift towards greater insurance penetration and wider financial inclusion should support the sector’s development in the coming years. This chapter contains an interview with Mohammed Omran, Chairman of the Financial Regulatory Authority. ¬
Energy & Utilities
Egypt’s energy sector has traditionally been defined by the country’s status as the largest oil producer outside of the Organisation of the Petroleum Exporting Countries and the third-largest producer of dry natural gas in Africa. Its control over the Suez Canal, meanwhile, places it at the centre of the global energy network, safeguarding shipments between the Gulf, Europe and North America. In recent years the government has implemented an energy strategy aimed at eliminating power shortages and harnessing the private sector to broaden the range of energy inputs. The fruits of this effort are a transformation of a power deficit into a power surplus, the revitalisation of Egypt’s liquefied natural gas sector, and the emergence of solar and wind industries that are establishing the country as a leader for renewables.
Industry & Retail
Industry is front and centre of Egypt’s economic growth and diversification plans. The government aims to increase high-technology exports and boost the value of the manufacturing sector. To further enhance output and investment, Egypt continues to implement favourable policies, including the development of industrial zones and special economic zones. Although the sector will face challenges in the short term, a longer-term focus on infrastructure development is expected to soften the trend. Meanwhile, Egypt’s retail industry benefits from a growing population, affluent middle class and openness to new offerings. Although the pandemic is set to result in slower than anticipated growth in the short term, the government has taken steps to offset repercussions on the economy, such as raising online payment limits; increasing tax exemptions; and supporting informal workers. At the same time, customers are increasingly taking advantage of online retail options, which is likely to be a lasting trend in the post-Covid-19 world. This chapter contains interviews with Yehia Zaki, Chairman, Suez Canal Economic Zone; and Ahmed El Sewedy, President and CEO, Elsewedy Electric.
ICT & Innovation
Economic diversification has been a boon to Egypt’s digital transformation in recent years. The government aims to develop the country into a regional and global centre for ICT, and efforts are being made to strengthen the regulatory framework, reduce the risk of cyberthreats and expand the telecommunications network. In particular, the rollout of 4G has led to a rise in data consumption and provided an opportunity for operators to develop new products. The introduction of 5G in the coming years will continue this trend and is set to play a key role in the country’s future, especially as it opens the New Administrative Capital, Egypt’s first smart city. Meanwhile, the start-up ecosystem is increasingly dynamic, supported by initiatives aimed at widening access to financing. The Covid-19 pandemic has made the sector even more central to economic development, with the impact of the virus accelerating the digitalisation of government entities and businesses. This chapter contains an interview with Adel Hamed, CEO, Telecom Egypt.
Transport & Logistics
As Egypt seeks to integrate more fully into global value chains, the development of transport infrastructure is a vital part of the country’s long-term growth. The government has made investment in the transport sector a priority – both in an effort to increase foreign trade, and to reduce urban congestion and pollution. The sector has been substantially impacted by the Covid-19 pandemic, with international flights halted and pressure placed on logistics infrastructure to ensure the uninterrupted provision of essential goods. Although the likely global economic downturn following the pandemic will present challenges for the transport sector in the short to medium term, the country’s growing population, strategic location at the crossroads of various international trade routes, and steady demand for goods and transport services should ensure that the sector’s long-term prospects are positive.
Agriculture
Agriculture has long been a critical pillar of Egypt’s economy, strengthened by the rich natural conditions around the Nile. The country produces an array of fruits, vegetables, cereals, cotton, sugar and livestock for both domestic consumption and export. Despite challenging global factors, and growing concerns regarding the effects of climate change and urbanisation on water security, the agricultural sector continues to thrive. The country continues to tap into new markets, even amid the Covid-19 pandemic. Indeed, agricultural exports are strong, and by mid-May 2020 Egypt’s exports were more than half of the whole of 2019. New research and innovation initiatives will be key in teaching the next generation of farmers and sector officials improved methods, with the hope that these technologies will in time trickle down to the country’s small-scale farmers and set up the sector for a strong future.
Tourism
After years of recovery following the 2011 revolution, Egypt is once again a sought-after tourist destination. In 2019 the sector contributed LE496.4bn ($30.6bn) to GDP, representing around 9.3% of the total, a 0.2% increase on the previous year. Although the spread of Covid-19 significantly impacted the industry in the first half of 2020, it is expected that growth will resume in 2021. Rising visitor numbers will be supported by the construction of Capital International Airport, which will serve the new capital city starting in late 2020 or early 2021. In addition, new flight routes are expected to open, connecting the country’s resorts and archaeological sites in order to draw in more leisure tourists, which account for around 86% of total visitor spending. It is hoped that the move to establish Egypt as a world leader in antiquities tourism, alongside the development of traditional sun-and-sea offerings, will reinvigorate the sector.
Health & Education
Both the health and education sectors are in the process of significant reform. A universal health insurance (UHI) plan is currently being implemented, which promises widespread change to the nation’s administration of care. Although Covid-19 has placed a considerable strain on health infrastructure, the pandemic provides Egypt with an opportunity to streamline reforms and strengthen weak spots in the system. The rollout of the UHI scheme, alongside the growth of the local pharmaceuticals industry, should also help to attract investment. Meanwhile, for the next decade, the Ministry of Education is focused on implementing a major reform programme known as Education 2.0. The initiative plans to overhaul K-12 schooling by introducing student-centred teaching and competency-based learning, with a strong focus on technology. Although the country’s schools still face challenges of overcrowding and poor-quality infrastructure, the authorities’ increasing openness to international and private investment should ensure that the outlook remains bright.
Tax
This chapter offers an overview of Egypt’s taxation system, which has undergone a number of reforms in recent years in an effort to build an investor-friendly environment. Recent changes include the introduction of stamp tax on the disposal of securities, updates to the progressive rate for personal income tax, and the proposal of a simple regime for small and medium-sized enterprises. It contains a viewpoint from Cherif Hammouda, Partner, RSM.
Legal Framework
This chapter explores Egypt’s legal system, including the laws that are most relevant for foreign investors. These include those that regulate corporate operations, labour, investment and property, as well as the regulations governing the country’s free zones. In recent years efforts have been made to ensure that local and international investors are treated equally, and a number of business types are open to full foreign ownership.
The Guide
This chapter contains selected listings of some of the top hotels in the greater Cairo area, helpful tips for business and leisure travellers, and other useful advice for visitors to Egypt.
Explore chapterTable of Contents
There are no articles in this chapter. To view the table of contents, please open click the "View in online reader" link above.
Mena FN: How Egypt's banking sector is coping with Covid 19
Ahram Online: Coronavirus an opportunity for Egypt's startups to grow
Egypt Today: Oxford Business Group examines Egypt's response to COVID-19
Egypt Business Directory: Egypt Today Oxford Business Group highlights Egypt...
