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8/11/2019 egypt economic analysis
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EGYPTEconomic Analysis
Anubhav Proothi, 13P127Chirag Nepalia, 13P137
Kanika Virmani, 13P146
Pranjal Goel, 13P156Shashank Shukla, 13P166
Sumit Batra, 13P176
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Introduction
Before the revolution resulted in the closure of4500 enterprises and the flight of capitaloffshore, only 13 percent of foreign earningscame from the export of manufactured goods.
Revenue from the Suez Canal and the SumedPipeline, tourist spending, remittances fromEgyptians working abroad, and foreign aidsupport the state.
The civil war in Libya sent most of one and a halfmillion Egyptian workers home to congestedcities, inflated the unemployment rate, and cost
the countries desperately needed remittancepayments.
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Introduction
Qatar funneled 8 billion dollars to Egypt. Turkey provided anothertwo billion and Libya added 2 billion more. Each contributionmade is easier to delay settling the loan with the IMF
Since the start of the Revolution, the Central Bank of Egypt hasbeen engaged in a futile effort to curb the inflation by supportingthe exchange rate of the currency. The Strategy has been to allowfor a gradual 3 percent depreciation of the Pound by maintaininga managed float. That has drained the reserves from 36billion to 14 billion of which only half was available forinternational payments.
Economic reforms to encourage foreign and domestic investmentintroduced in 2004 attracted foreign investment that grew theeconomy in 2008 at an annual rate of 7.2 percent from 4.1percent.
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Economic Indicators
GDP (Current Prices, US Dollars) $257.29 billion
GDP (PPP, US Dollars) $559.84 billionGDP (Constant Prices, National Currency) EGP 386785 million
Gross National Savings (% of GDP) 13.46%
Inflation Rate 10.44%
Unemployment Rate 13.55%
Exports (monthly) $2.30 billion
Imports (monthly) $4.41 billion
Current Account Balance (% of GDP) -3.10%
Current Account Balance $ -5.45 billion
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GDP
The gross domestic product (GDP) measures the nationalincome and output for a given country's economy.
The gross domestic product (GDP) is equal to the totalexpenditures for all final goods and services producedwithin the country in a stipulated period of time.
The Gross Domestic Product (GDP) in Egypt was worth257.29 billion US dollars in 2012.
The GDP (PPP) value of Egypt represents 0.64 percent ofthe world economy.
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GDP Composition
Agriculture
15%
Industry37%
Service48%
GDP COMPOSITION
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GDP Trend
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GDP Growth Rate
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Insights
Political scenario
• Fall of HosniMubarak’sgovernment
• MohammedMorsi’s government hasfurther broughtuncertainty to theEgyptianeconomy
Production industry
• This industry isstrugglingbecause there isshortage of fueland gas
• The foreigninvestors havepulled out moneyfrom companiesand Egypt'sindustries
Unemployment
• Theunemploymentrate is high andpeople have nowork to do
• Hence peopledon’t have
purchasing powerto buy theproducts
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Government Spending
Government spending is the amount of money that federal, state, andlocal governments spend on public services provided to its citizens.Government expenditure covers spending on goods and services like
defence, judicial and education system. Yet, it excludes governmenttransfers like social security and unemployment benefits
One third of Egypt’s public spending is directed annually towardsubsidies of various consumer goods, ranging from fuels to tea. Thefiscal burden of subsidies amounts to more than 13 percent of grossdomestic product (GDP),
Government Spending in Egypt increased to 179000 EGP Million in 2012from 157000 EGP Million in 2011.Egypt Government Spending averaged47281.5 EGP Million reaching an all time high of 179000.0 EGP Million in
June of 2012 and a record low of 2580.0 EGP Million in June of 1980.
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Government Spending
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Subsidy Composition
Natural gas
8.1 %
LPG
29.2 %
Gasoline
Diesel oil
35.0 %
Kerosene 0.4 %
14.0 %
Bread
60.86 %
Vegetable oil
20.74
%
Sugar
13.13 %
Rice
5.27 %
Tea
0.00 %
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Insights
Goodwill of people
• There were no
austerity measurestaken up by Morsigovernment andnot even byMubarak’sgovernment andthe data clearlystates the same.
Recentadvancements
• Egypt's cabinet on
Wednesdayapproved anadditional 22.3billion Egyptianpounds ($3.2billion) in spendingon investmentprojects to boostthe economy overthe coming 10months, DeputyPrime Minister ZiadBahaa el-Din said.
Hurdles
• Unemployment
• Fuel subsidies• Dilemma between
power andcountry’s economicwelfare
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Consumer spending
Consumer spending, also called consumer consumption or expenditure, isthe amount of money that households spend on goods and services in orderto satisfy their needs.
Consumer Spending in Egypt increased to 1223200 EGP Million in 2012 from1036000 EGP Million in 2011. Consumer Spending in Egypt is reported bythe Central Bank of Egypt. From 1980 until 2012,
Cairo's political crisis began with an economic crisis. When you excludesavings, food accounts for half of Egyptians' disposable income. Global foodinflation hit the country hard especially considering Egypt's householdincome is on pace to shrink dramatically in the next 12 months.
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Consumer Spending
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Consumer Spending by Category
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Investment spending
It records total business spending on fixed assets, such as factories,machinery, equipment, dwellings, and inventories of raw materials,which provide the basis for future production. It is measured gross ofthe depreciation of the assets, i.e., it includes investment that merelyreplaces worn-out or scrapped capital.
Egyptian Cabinet has approved a $3.2 billion increase in spending oninvestment projects over the next ten months. Egypt’s interimgovernment plans to invest billions of dollars in infrastructure projects,
including housing and transport to revive the country’s batteredeconomy.
Government was seeking a loan of $4.8 billion
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Investment Spending
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Insights
Political turmoil
• The politicalturmoil hasbrought theinstability tothe economyand has
created scaryenvironmentfor theinvestors
FDI
• No incentivesfor foreigninvestors
• Egyptian pounddepreciatingcontinuouslysending thewrong signals
Money GoingOut
• The investorsarecontinuouslytaking theirmoney outleaving the
productionindustrystagnant
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Exports
Exports in Egypt increased to 2303 USD Million in September of 2013 from
2009 USD Million in August of 2013
In Egypt, exports account for about a quarter of GDP
The major exports are oil and other mineral products (32 percent of totalexports), chemical products (12 percent), agricultural products, livestock andothers fats (11 percent) and textiles (10.5 percent, mainly cotton).
Other exports include: base metals (5.5 percent), machinery and electricalappliances (4.5 percent) and foodstuff, beverages and tobacco (4 percent).
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Imports
imports in Egypt decreased to 4142 USD Million in September of 2013from 4436 USD Million in August of 2013.
Egypt imports mainly mineral and chemical products (25 percent of
total imports), agricultural products, livestock and foodstuff (24percent, mainly wheat, maize and meat), machinery and electricalequipment (15 percent) and base metals (13 percent). Other importsinclude raw hides, wood, paper-making products, textiles and footwear(9.5 percent), artificial resins and rubber (6 percent) and vehicles andaircraft (5.5 percent).
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Imports
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Balance of Trade
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Insights
Egyptian pounddepreciating
• The Egyptianpound had beencontinuouslydepreciating andhence the importshas become morecostly.
• It has also madeother countries tolook for otheroptions for theirown imports
Oil Imports
• The oil importshad become morecostly as theinternationalprices rose andhence puttingmore pressure on
the government.
Tourism Industryhit
• This industryforms more than2 percent of gdpof Egypt but thepolitical turmoilhas made thisindustry stagnant
• Even otherbusinessesrelated to tourismindustry arestruggling.
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Future Steps
Political front
• In span of 3 years
there had been 2changes ingovernment whichhas brought theinstability toeconomicenvironment
• There should be ademocraticgovernment whichcan take care ofboth the religiousgroups
Investment front
• Egypt has to get FDI
to promote the bigprojects and bringthe productionsector on the track
• They have toreassure theexisting customers
so that they don’tpull away theirmoney
GovernmentSpending
• The government
should spend moneyto promote theindustries
• Government shouldbring in someausterity measuresso that relief funds
can be easilyavailable fromoutside
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Thank You
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