Economic situation Modernising the economy, creating jobs

President Mubarak began the process of transforming Egypt from a state-controlled economy into a market system. However, the reforms were designed in such a way that they mainly benefited the economic elite. Only a relatively small proportion of the population benefited from the structural transformation.

Construction site vehicles in front of a wind turbine in Egypt

Construction site vehicles in front of a wind turbine in Egypt

Construction site vehicles in front of a wind turbine in Egypt

With its Vision 2030, the current government has launched an ambitious programme for the sustainable development of the country and has introduced state-led measures to modernise the economy. Subsidies that distort competition are being dismantled and tax reforms initiated. The government also has ambitions to overhaul the public budget and to improve the investment climate.

Egypt has overcome the COVID-19 crisis without a recession

In previous years, the Egyptian economy achieved a growth rate of 4-5 per cent. In 2020, the figure decreased somewhat as a result of the COVID-19 pandemic, reaching 3.6 per cent. Compared with other countries in the region, however, Egypt came through the COVID-19 crisis in relatively good shape – even though tourism, one of the country's most important revenue sources, was badly affected. For 2023, the International Monetary Fund (IMF) is predicting economic growth of 4.4 per cent (January 2023 figure).

Lack of prospects for young people

The greatest challenge for Egypt continues to be the high level of unemployment which, according to official figures, stood at around 7.5 per cent in 2021. More than 23 per cent of 15- to 24-year-olds are jobless.

In order to reduce pressure on the budget, the number of government employees has been radically reduced in the past few years. However, private businesses have not been able to create enough new employment over the same period. As a result, many people are trying to make a living in the informal sector. The employment rate, that is the percentage of employees with formal sector jobs in the working population, is only around 40 per cent and approximately 70 per cent of the Egyptian population is either poor or at risk of poverty.

In order to preserve political stability and prevent social tensions, the Egyptian government is putting an emphasis on large-scale infrastructure projects. However, further measures to stimulate the private sector are necessary in order to create sufficient jobs and decent incomes for all population groups in the long term.

Development potential

Egypt is the most highly industrialised country in Africa after South Africa. If the necessary enabling environment were to be put in place, foreign trade could help secure the country's economic development in the long term. Further assets are Egypt's favourable geographical location and a large population of young people who can contribute actively to the economy.

The link between the Mediterranean and the Red Sea is very important for international shipping. Accordingly, it is hoped that the now completed expansion of the Suez Canal will help to generate additional revenues from transit fees. The establishment of an Economic Zone is intended to attract industry to the area adjacent to the Suez Canal. Developing the area so as to create a regional logistics hub could transform Egypt into one of the world's most important trading centres.

Egypt also has good natural conditions for solar and wind power generation. The production of “green hydrogen”, too, offers potential for development. In November 2022, the BMZ and the Federal Ministry for Economic Affairs and Climate Action (BMWK) signed a joint declaration of intent with Egypt, in which the two countries make a commitment to jointly advance efforts in relation to green hydrogen and to include the private sector in the development of this technology.

Membership of the World Trade Organization (WTO) and the conclusion of numerous economic agreements offer Egypt access to attractive international markets. Since 2004, free trade between Egypt and the European Union has been regulated by an Association Agreement. A special agreement reached in 2010 liberalised much of the trade in agricultural and fisheries products.

As at: 23/01/2023