Over the past years after the revolution of June 30, 2013, the Egyptian economy witnessed an unprecedented recovery at all levels and different sectors, including improved confidence of international investors and international credit agencies, in addition to reforms in the growth of foreign reserves by more than $45 billion in February, and an unparalleled growth rate of 6%.
Foreign Exchange Reserves
Foreign exchange reserves of Egypt reached $45.7 billion in March 2020, while the foreign reserves during the fiscal year 2012/13 was in the range of only $14 billion, meaning that the foreign reserves more than tripled in less than 7 years.
Reserves increased by more than 150% than 2012 estimates, only to drop to $36 billion following the corona pandemic crisis.
The Egyptian economy has witnessed peerless developments during the past six years due to the restructuring of fiscal and monetary policies thanks to the economic reform program, in coordination with the International Monetary Fund (IMF) and the amendment of several legislations and laws to enhance the economic indicators in the country.
Since the 2012/13 Brotherhood rule, huge changes has been made in the Egyptian economy, making it the strongest in the Middle East and North Africa (MENA).
Growth Rates
Egypt was able to achieve a growth rate of 5.6% during the year 2019 and is expected to record 4.2% in 2020, a drop of 1.4% due to the coronavirus crisis. According to estimates, the country was expected to reach 6% growth rate ahead of the pandemic, which stalled growth globally, yet, Egypt was the least affected by the deadly virus.
According to the World Bank and IMF, Egypt will be the only country in the MENA region to have a positive growth rate, which places it on the list of the 18 best economies in the world in 2020, whereas the growth rate during the Brotherhood era was estimated in the range of 2%.
Unemployment rates
Egypt's unemployment rate fell to 7.7% in Q1 of 2020 compared to 8.1% in the same period last year, where the number of unemployed dropped by 31 thousand to 2.24 million.
Meantime, the Central Agency for Public Mobilization and Statistics CAPMAS stated that it had stopped collecting field data since mid-March, before the government began taking preventive measures related to the coronavirus.
In 2019, Egypt also succeeded in reducing the unemployment rate at 8.9% after it reported 13.2% before the June 30 revolution.
Foreign Direct Investment (FDI)
Foreign Direct Investment (FDI) in Egypt increased by $4.899 Million in Q4 of 2019. Egypt was able to achieve a boom in the volume of foreign investments received, both direct and indirect, making it shine on the map of global investments.
The country received $8.5 billion of direct investments during the year 2019, while the volume of indirect investments reached $26 billion. On the other hand, the volume of FDI during the Brotherhood era did not exceed $900 million.
Budget Deficit
Egypt recorded a Government Budget deficit equal to 7.20% of the country's Gross Domestic Product in 2019.
The budget deficit dropped to 8.4% during the fiscal year 2018/19 and is expected to drop further to 7.2% during the fiscal year 2019/20, from 13.8% in 2012/13.
Egypt's credit rating
Standard & Poor's credit rating for Egypt stands at B with stable outlook. Moody's credit rating for Egypt was last set at B2 with stable outlook. Fitch's credit rating for Egypt was last reported at B+ with stable outlook, from CCC- in 2012/13.
In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Egypt thus having a big impact on the country's borrowing costs. Egypt's declining debt-to-GDP ratio means that it is able to cope with external shocks. Domestic debt levels are expected to decline as the effects of energy price hikes dissipate.
Gross Domestic Product (GDP)
The Gross Domestic Product (GDP) in Egypt was worth $280 billion in 2019, according to official data from the World Bank and projections from Trading Economics.
As a natural result of the increase in the volume of foreign and domestic investments and the increase in government investment spending, the size of the gross domestic product increased from EGP 2 trillion during 2013 to EGP 6.3 trillion during 2019 and is expected to reach EGP 7.2 trillion during the fiscal year 2020/21 as the government investment spending doubled significantly during the past years, reaching EGP 210 billion during the fiscal year 2019/20, making it the 3rd globally in terms of government financing needs.
It is expected to reach EGP 280 billion during the fiscal year 2020/21, which had the effect of improving employment rates, while the volume of investments during FY 2012/13 amounted to EGP 55.6 billion.
It has more than doubled 5 times during the past 7 years, and the increase in government spending was mostly directed towards construction projects, infrastructure, roads and utilities with the aim of improving the conditions of the Egyptian citizen.
Egyptian Pound
The Egyptian pound had managed to drop to 3-year low at 15.64 against the US dollar until March 2020. The pandemic caused a drop in foreign reserves, and other economic implications to the global economy, resulting in a slight increase in the exchange to 16.16, an increase of 0.56 piastres, making the Egyptian currency the least affected among emerging countries.
The pound is expected to trade at 16.20 by the end of this quarter, according to global macro models and analysts expectations, and 16.30 in 12 months time, however, the quick recovery and funds from international organizations can bring back strength to the currency.
Inflation
Egypt's annual inflation rate declined to 4.7% in May 2020 from 5.9% in the prior month to record the lowest inflation rate since last November, due to a fall in prices of food and beverages by -0.3%, especially fruits and vegetables by -1.0%, reflecting a drop in demand during the Muslim holy month of Ramadan, and curfew to curb the spreading of coronavirus.
The annual core inflation also declined to 1.5% in May, the least since January 2005, from 2.5% in April. On a monthly basis, consumer prices were unchanged, after increasing 1.25% in the preceding month.
Interest Rate
The Central Bank of Egypt (CBE) left its overnight deposit rate steady at 9.25% during its regular meeting in June of 2020, close to the 2015 estimates. Policymakers said that the decision is consistent with achieving the inflation target rate of 9% ± 3% in the last quarter of 2020 and price stability over the medium term.
When rates go down, borrowing becomes cheaper, making large purchases on credit more affordable, such as home mortgages, auto loans, and credit card expenses.
The overnight lending rate and the discount rate were also kept steady at 10.25% and 9.75%, respectively. Meantime, the recently announced gradual easing of lockdown is expected to support the recovery of the economy.
Health Spending
Spending on educational services increased significantly during the past years after the issuance of the 2014 constitution, which stipulated allocations for education, health and scientific research.
The scientific researched 1% of the GDP, while education 6%, and health amounted to 3%.
The government is committed to implementing the constitutional benefits, and the volume of spending on health during the year 2019/20 amounting to EGP 175,511 billion, which is expected to reach EGP 211 billion during the year 2020/21, from EGP 30 billion in FY 2012/13.
Spending on Education
The amount of spending on education reached EGP 301 billion during the year 2019/20 and is expected to reach EGP 336 billion during the FY 2020/20, from EGP 141 billion during the FY 2012/13.
IMF Reform Program
Finally, the size of the growth and development in the economic indicators has pushed international institutions and rating agencies to praise the Egyptian economy and the economic reform that began in 2016.
In 2012, the IMF rejected Egypt’s request in 2012 to obtain a loan of $4.8 billion, and issued its report in March 2013, confirming that Egypt is unable to pay its obligations and that Egypt will enter a cycle of financial failure.
However, the IMF confirmed that Egypt's 2016 economic reform was a success story, in which the country managed to improve its economic indicators by having a more stable fiscal and monetary policies, promoting growth, and development towards Egypt's Vision 2030.
On June 26, 2020, The Executive Board of the International Monetary Fund (IMF) approved a 12-month Stand-by Arrangement for Egypt (SBA), with access to $5.2 billion, confirming the county's ability to repay its liabilities and potential to cope with challenges posed by the COVID-19 pandemic.
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