Economic situation Modernising the economy, creating jobs

President Mubarak began the process of transitioning Egypt from a state-controlled economy to a market system. Yet reforms were designed in such a way that they benefited mainly the top players in the economy. Only a relatively small proportion of the population benefited from the structural transformation.

Teenager selling fruit at a market in Egypt

Teenager selling fruit at a market in Egypt

Teenager selling fruit at a market in Egypt

Furthermore, Egypt's economy has suffered a great deal under the political instability that followed the revolution in 2011. Under a reform package agreed with the International Monetary Fund (IMF) in 2016 it did, however, manage a slight recovery. In 2018, economic growth was at 5.3 per cent, and for 2019 and 2020 the IMF also expects growth rates of between five and six per cent. However, this still means that growth rates are below what the country was achieving ten years ago.

With its Vision 2030, the current government has launched an ambitious programme for the sustainable development of the country and is directing efforts to modernise the economy. The government is cautiously dismantling subsidies that distort competition and is embarking on tax reforms. It also has ambitions to overhaul the public budget and to improve the investment climate.

Lack of prospects for young people

The biggest challenge for Egypt continues to be the high level of unemployment, which officially stands at roughly eleven per cent. Among 15- to 24-year-olds, more than 30 per cent are without jobs.

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 to make up for the lost jobs. As a result, many people are trying to make a living in the informal sector.

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

German Development Minister Gerd Müller in the Egyptian solar park Benban in February 2020. Here, 7.2 million solar modules will be used to generate electricity.

German Development Minister Gerd Müller in the Egyptian solar park Benban in February 2020. Here, 7.2 million solar modules will be used to generate electricity.

German Development Minister Gerd Müller in the Egyptian solar park Benban in February 2020. Here, 7.2 million solar modules will be used to generate electricity.

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 enlargement of the Suez Canal will help to generate additional revenues from transit fees. Developing the canal so as to create a regional logistics hub could transform Egypt into one of the world's most important trading centres.

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. Egypt has good natural conditions for solar and wind power generation. Decision-makers are showing greatly increased interest in renewable energies, but so far the traditional energy sectors – such as coal – still have the upper hand.