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Risk Assessment: Egypt’s Economic Climate

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Egypt’s economy has been facing significant challenges in light of ongoing political unrest. Despite these challenges, the country is expected to return to solid growth in 2022.

Country Risk Rating

Egypt’s country risk rating stands at C, with a very uncertain political and economic outlook contributing to a high corporate default probability. According to Coface, the business environment is mediocre, with availability and reliability of financial information varying widely and debt collection sometimes being difficult.

Strengths

Large Market

Youthsful Population

Advantageous Geopolitical Situation

Tourism Potential

Gas and Mineral Resources

The country also enjoys political and financial support from Gulf monarchies and Western countries, as well as an IMF support program.

Weaknesses

Poverty

Low Employment Rates among Young People

Large Informal Economy

Vulnerability to Jihadist Activity in the Sinai Region

Tensions between Different Religious Groups

High Public Debt

The country’s public debt is high, with financing needs exceeding 30% of GDP.

Current Trends

Despite these challenges, Egypt’s economy is expected to rebound in 2022, driven by the easing of health measures and global recovery. Household consumption is expected to increase, supported by remittances and a minimum wage for the private sector. Investment will also continue to pick up, particularly in the gas and port facilities sectors.

Fiscal Consolidation

The government deficit is expected to improve in 2022, with a return to a primary surplus of around 1.5% of NDP. This should lead to a decline in public debt, although interest payments will remain high. The current account deficit is also expected to narrow, driven by increased tourism and gas exports.

Concentration of Power

The Egyptian government has consolidated power under President Abdel Fattah al-Sissi, with the president’s term extended from four to six years. This has led to concerns over human rights and freedom of speech, which may continue to stoke social unrest.

Conclusion

Egypt’s economic climate is marked by significant challenges, including political instability, high public debt, and a large informal economy. However, the country also boasts several strengths, including its large market, youthful population, and gas and mineral resources. With a return to solid growth expected in 2022, Egypt remains an attractive investment destination for those willing to navigate its complex economic landscape.