Egypt: Nation’s Economic and Social Status Tells a Complex Story
Addis Ababa — While the world’s eyes focused on the political situation in Egypt, the United Nations Economic Commission for Africa’s analysis shows a complex story.
On the one hand, the country managed to sustain activities in most sectors, despite a number of challenges that led to shrinking exports. On the other hand, the political crisis is situated in a context of weak global demand that has negatively affected Egypt’s exports and Suez Canal revenues.
Entitled “The Economic Situation in Egypt in the Context of Political instability and a Risky Transition “, the brief on Egypt explores its public finances, balance of services and social development.
It notes that unemployment appears critical in Egypt due to the political and economic uncertainties which have led to a reduction in income from tourism and a lack of visibility among investors, who have either postponed their projects or withdrawn their capital, depriving people of thousands of jobs.
The Brief concludes on a number of potential scenarios. It notes that the high level of uncertainty due to the political instability and violence, coupled with the growing public deficits and the sustainability of the subsidies scheme, make the prospects very uncertain for Egypt. The three scenarios described will also be highly sensitive to key exogenous factors such as:
- The evolution of the food and oil prices and their a direct impact on fiscal and balance-of-payments deficits;
- The economic situation of the main partners of Egypt (Europe and the Gulf countries), with consequences on FDI, remittances and external demand. In the same vein, a rapid improvement of the security situation in the Middle East and Libya will bring important peace dividends to the Egyptian economy.
- Deeper regional integration in Africa and among Arab countries, as Egypt is one of the most diversified economies of the continent with an important potential of trade and represents a regional place for financial services.
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