The political events that unfolded in Egypt from the 25th of January 2011, leading to step-down of President Hosni Mubarak and the toppling of his regime of 30 years, and the contagion effect that followed in the MENA region, took its toll on the Egyptian economy. As the new political milieu and landscape are shaped, Egypt’s economic outlook is being redefined.

Despite the economic losses that have been incurred and the resulting interruption in Egypt’s path to economic development, we believe that Egypt’s long-term growth story remains strong.  We expect that the sweeping legislative and institutional reforms that will rid Egypt of widely-spread corruption, hold the government and the president accountable and ensure political and social equity, will pave the way to a much stronger and fast growing economy in the medium and long term. The political events in Egypt hit the main components of its economy, namely private consumption and investment, followed by exports, interrupting its economic growth in the short term and undermined its growth potential in the medium term. Consequently, real GDP growth fell from 5.1% in FY09/10 to 1.8% in FY10/11. We believe that Egypt’s growth potential will be unleashed once there is political stability, which is expected to bring back investment levels to where they were before the revolution, if not more. Much-needed investment targeted toward employment generation and increasing exports is key to Egypt’s economic development. Moreover, the complete overhaul of Egypt’s institutional and legal framework that will ensure more equitable distribution of income and lower poverty rates in Egypt, is currently taking place. While the long term future seems bright, Egypt faces a number of short-term challenges, such as a widening fiscal deficit and rising cost of financing debt, a slowing economy and balance of payment pressures.

Therefore, the government’s focus has been on short-term policies that are catered to these specific shot-term challenges. We believe that by FY12/13, the time when Egypt’s elected parliament and government will be in place, the focus will be on medium and long-term economic policies that are geared toward achieving its long-term vision of economic prosperity.

EGX30 Index