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



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.



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.



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



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.



GDP Composition

Agriculture

15%

Industry37%

Service48%

GDP COMPOSITION



GDP Trend



GDP Growth Rate



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



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.



Government Spending



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 %



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



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.



Consumer Spending



Consumer Spending by Category



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



Investment Spending



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



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).





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).



Imports





Balance of Trade



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.



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



Thank You

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egypt economic analysis