Focus on Egypt: Key Development Areas

May 27, 2021 | Egypt

Egypt is the third-largest economy in Africa and the second-most populous. By 2050, Egypt will have 160 million people; 22 per cent will be younger than 18 years of age.

Focus on Egypt: Key Development Areas

Egypt is the third-largest economy in Africa and the second-most populous. By 2050, Egypt will have 160 million people; 22 per cent will be younger than 18 years of age.

Egypt has more than 100 million people, growing at 2 per cent annually (2019’s estimates by the World Bank). More importantly, 60 per cent of them are youths (Middle East Institute). Back in 2015, Sri Mulyani Indrawati, managing director of the World Bank, listed four key development areas that, if improved, will better the lives of the youth and the larger Egyptian society, namely governance, the rule of law, the economy and social inclusion. The same holds today. 

1) Economy 

Egypt real GDP growth was surprisingly positive at 3.6% during FY2019/2020 (fiscal year runs from 1st July to 30th June), though it was down from 5.6% in FY2018/2019 (World Bank). GPD is forecast to grow by 3% for the current fiscal year ending 30th June 2021 (IMF). These successive declines are due in part to Covid-19’s lockdown from mid-March to 1st July 2020 in Egypt and its adverse repercussions on the economy, especially on the tourism sector accounting for 5.5 per cent of GDP (AfDB). Egypt has an economy where the government is at the centre of the economy instead of the entrepreneurs (IMF). This structure stifles competition and innovation and promotes misallocation of resources (the government being less productive than the private sector). Egypt can’t afford any more of the latter: public debt is approaching 100% of GDP at 90.6 per cent in 2020 (an increase of 4 per cent from its 2019’s level). Sixty per cent of the current debt is maturing in one year or less (AfDB). 

2) On governance in Egypt 

In the 2020’s Corruption Perception Index, Egypt ranked 117 of 180 countries globally and scored below 50, i.e., 33/100 (100 =very clean and 0 = highly corrupt). Egypt’s score was higher in 2019 at 35/100. This performance suggests that little progress has been made towards the fight against corruption in Egypt. The implementation of policies in place to fight corruption is weak (Transparency International). The reason may be due partly to inadequate adherence to the rule of law, discussed next. 

3) Rule-of-law 

Similarly, in the 2020’s World Justice Project rule of law Index, Egypt scored 0.36 (1 = strong adherence and 0 = low adherence to law) and ranked 125 of 128 countries globally. Sadly, Egypt’s score was the same from 2017 through to 2020. This rating suggests that Egypt has made little or no progress in the adherence to the rule of law in practice during the last five years and is inadequate at protecting people from injustices. The insufficient commitment to the rule of law leads us to our next section: social inclusion. 

4) Social inclusion

Human capital is vital to create a more inclusive society that protects the most vulnerable (IMF). Egypt ranked at 115 of 174 countries in the World Bank’s Human Capital Index (HCI) in 2020 with a score of 0.49 on a scale of 0 to 1. Following the World Bank own interpretation guide for the HCI, this means that the future earnings potential of Egyptian children born today will be 51 per cent below what they could have achieved with complete education and total health. The future GDP per worker could be twice as high if Egypt reached the benchmark of comprehensive education and total health. 

Moreover, fuel subsidies in Egypt benefit large energy consumers (or the rich) more than the poorest households (IMF). Thus, the need in Egypt for targeted interventions. Therefore Egypt should close the data gap: sadly, its research and development expenditure as a per cent of GDP is below 1 per cent at 0.72 per cent (World Bank). However, Takaful (for families with children) and Karama (for elderly and people with disabilities) cash transfer programs, as well as food smart-cards for the poorest households, are social inclusion efforts in the right direction currently being undertaken in Egypt with some success (World Bank & IMF).

To summarise, in order to catalyse its economic transformation, Egypt should restructure its public debts to extend its maturity (AfDB), close the data gap, place entrepreneurs at the centre of the economy, strengthen the independence of the justice system and improve its human capital.

This article was written by Hugue Nkoutchou PhD (Bath).

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