Egypt Country Risk Report

Published 25 February 2015 | Quarterly

  • 52 pages
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$1,195.00
Egypt Country Risk Report

Core Views

  • 2015 will be a relatively positive year for the Egyptian economy, as the currency stabilises and investment returns to the county.

  • The fiscal and net export position will improve significantly on the back of fuel subsidy reform. Subsidy cuts will likely be watered down if public unrest occurs on a significant scale, however, the bulk of reform will remain in place.

  • Hikes to domestic energy prices will push consumer price inflation back into the double digits by the end of the year.

  • Egypt's geopolitical importance will ensure that even if an IMF agreement is delayed for longer than expected, further foreign aid commitments will materialise around the turn of the year. Western powers such as the US and EU have an interest in ensuring the North African country does not experience a more pronounced economic and political crisis. However, it will be donations from the GCC which keeps Egypt afloat this year.

  • We do not expect an IMF deal in 2015, as the economic rationale has waned somewhat since the influx of foreign aid and it is politically unpalatable at present.

  • Parliamentary elections in Q214 will result in a fragmented legislative with minimal Islamist presence.

Major Forecast Changes

  • We now expect sharper depreciation in the Egyptian pound over the coming year, reaching EGP8.000/USD by end-2015.

Key Risks To Outlook

  • A failure to secure external financing (whether through the IMF or bilateral aid) raises the risks of a disorderly devaluation of the Egyptian pound.

  • Terror attacks, or disturbances caused by the Muslim Brotherhood could have a significant impact on investment and tourism figures.

Economic Activity (Egypt 2010-2019)
Indicator 2010 2011 2012 2013e 2014e 2015f 2016f 2017f 2018f 2019f
National Sources/BMI
Nominal GDP, USDbn 214.1 230.7 259.5 255.0 282.0 301.3 318.7 348.5 377.8 402.1
Real GDP growth, % y-o-y

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Elections To Result In Fragmented Parliament
8
TABLE: Political Overview
8
Long-Term Political Outlook
10
Four Scenarios For The Coming Decade
10
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
Acceleration In Growth On The Back Of Political Stability
14
TABLE: GDP By Expenditure
14
Fiscal Policy
16
Budget Deficit To Narrow On The Back Of Subsidy Reform
16
TABLE: Fiscal Policy
17
Balance Of Payments
18
Finally On A Stable Trajectory
18
TABLE: Current Account
19
Exchange Rate Policy
21
EGP - FDI Inflows To Support Pound
21
TABLE: BMI Currency Forecast
21
Islamic Finance
22
Islamic Banking: Growing To Slow Globally, But Opportunities Remain
22
TABLE: Islamic Bonds & Loans Issued
23
Investment Climate
25
MENA FDI: Outperformers And Laggards
25
Chapter 3: 10-Year Forecast
29
The Egyptian Economy To 2023
29
Policy Uncertainty Weighs On Outlook
29
TABLE: Long-Term Macroeconomic Forecasts
29
Chapter 4: Operational Risk
31
SWOT Analysis
31
Operational Risk Index
31
Operational Risk
32
TABLE: Operational Risk
32
Transport Network
33
TABLE: MENA - Transport Network Risks
34
Economic Openness
37
TABLE: MENA - Economic Openness Risk
38
TABLE: Imports By Product
39
Chapter 5: Key Sectors
41
Infrastructure
41
TABLE: Construction And Infrastructure Industry Data
42
TABLE: Construction And Infrastructure Industry Data
43
Oil & Gas
45
TABLE: Oil Production
46
TABLE: Oil Production
46
TABLE: Gas Production
47
TABLE: Gas Production
47
Other Key Sectors
51
Table: Defence and Security Sector Key Indicators
51
Table: Food and Drink Sector Key Indicators
51
Table: Autos Sector Key Indicators
51
Table: Pharma Sector Key Indicators
52
Table: Telecoms Sector Key Indicators
52
Table: Freight Key Indicators
52
Chapter 6: BMI Global Assumptions
53
Global Outlook
53
Reality Check: Uncertainty Reigns
53
Table: Global Assumptions
53
Table: Developed States, Real GDP Growth, %
54
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
54
Table: Emerging Markets, Real GDP Growth, %
55

The Egypt Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Egypt. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Egypt's economic, political and financial prospects through end-2019, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Egypt's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Egypt's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Egypt, including currency volatility, the commodity price boom and protectionist policies.

The Egypt Country Risk Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Egypt' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Egypt through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Egypt Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Egypt and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Egypt, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Egypt over the next 5-years?

BMI's Egypt country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Egypt Market - Political Strengths, Weaknesses, Opportunities and Threats facing Egypt.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Egypt's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Egypt’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Egypt's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Egypt?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Egypt against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Egypt’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Egypt will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Egypt's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express