Egypt Country Risk

Report
Executive Summary
You have downloaded a PDF of BMI's latest views on the market, summarising the key findings that are
assessed in detail in the new report, as well as the full report Table of Contents.

Find out more about this report by contacting one of our experts on +44 (0)20 7246 5170

For more information, please contact us at: enquiry@bmiresearch.com

+44 (0)20 7246 5170
Egypt Country Risk Report Published Date: 01 Jan 2018

Table of contents
Executive Summary 5

Core Views 5

Key Risks 5

Chapter 1: Economic Outlook 7

SWOT Analysis 7

BMI Economic Risk Index 7

Economic Growth Outlook 8

Growth To Remain Lacklustre 8

GDP By Expenditure Outlook 9

TABLE: COMPONENTS OF GDP (% OF TOTAL) 9
TABLE: PRIVATE CONSUMPTION FORECASTS 10
TABLE: GOVERNMENT CONSUMPTION FORECASTS 10
TABLE: FIXED INVESTMENT FORECASTS 10
TABLE: NET EXPORTS FORECASTS 10
Fiscal Policy And Public Debt Outlook 11

Drastic Subsidy Cuts To Improve Dire Fiscal Position 11

TABLE: SUBSIDY CUTS ANNOUNCED IN NOVEMBER 2016 11
TABLE: FISCAL POLICY 12
Monetary Policy 13

Major Rate Hike Coming In A Bid To Tame Inflation 13

TABLE: MONETARY POLICY 14
Currency Forecast 15

EGP: Massive Spike In Inflation Ahead, Following Free-Float 15

TABLE: BMI CURRENCY FORECAST 15

Chapter 2: 10-Year Forecast 17

The Egyptian Economy To 2025 17

Significant Reform Needed Before Potential Begins To Show 17

TABLE: LONG-TERM MACROECONOMIC FORECASTS 17
Contents Contents

Chapter 3: Political Outlook 21

SWOT Analysis 21

BMI Political Risk Index 21

Domestic Politics 22

Political Risks To Come To The Fore As Economy Falters 22

TABLE: POLITICAL OVERVIEW 22
Long-Term Political Outlook 24

Democracy Remains A Distant Prospect 24

Chapter 4: Operational Risk 27

Operational Risk 27
TABLE: OPERATIONAL RISK 27
Business Crime 28
TABLE: BUSINESSES RESPONSE TO RISK 29
TABLE: BUSINESSES RESPONSE TO RISK (CONT'D) 31

For more information, please contact us at: enquiry@bmiresearch.com

+44 (0)20 7246 5170
Government Intervention 33
TABLE: BUSINESS TAXES 34
TABLE: PERSONAL INCOME TAX 35

Chapter 5: BMI Global Macro Outlook 39

Global Macro Outlook 39

Austerity Has Peaked, But Populism Is Not Yet Policy 39

TABLE: GLOBAL ASSUMPTIONS 39
TABLE: DEVELOPED STATES, REAL GDP GROWTH, % 40
TABLE: EMERGING MARKETS, REAL GDP GROWTH, % 41
TABLE: MACROECONOMIC DATA & FORECASTS 43

For more information, please contact us at: enquiry@bmiresearch.com

+44 (0)20 7246 5170
 Egypt Country Risk Report Published Date: 01 Jan 2018

Core Views

● Economic expansion will pick up in Egypt in the current fiscal year, ending June 2018, as the tough structural
economic adjustment measures taken as part of the IMF programme entered into in November 2016 begin
to bear fruit.
● Some slippage in the run-up to May 2018 elections will see Egypt miss its fiscal deficit reduction target for
FY2017/18. Nevertheless, the reduction will be sufficient for the IMF to continue to support the country,
especially as the primary balance will turn positive this year for the first time since 2003.
● As 2018 elections approach, President Sisi will continue to shore up his position through a combination of
pro-poor spending and political repression, and we see no realistic challenge to a second term for him. On the
regional front, Sisi will continue to publicly support the blockade against Qatar given Egypt's reliance on
Saudi and Emirati funding.
● Egypt's external position will continue to improve over the coming years, as the devaluation of the pound in
2016 leads to a narrowing current account deficit and an ongoing rise in portfolio investment. Despite
loosening of capital controls we do not anticipate any marked capital flight owing strengthening economic
growth and improving investor sentiment.

Forecast Revisions

● We have revised up our real GDP forecasts, now projecting an expansion of 4.9% in 2017/18 (from a
previous forecast of 3.4%) and 4.6% the year after. We had anticipated that the extremely high inflation seen
since the massive devaluation of the currency in November would have severely constrained private
consumption, but despite anecdotal accounts of hardship, growth appears to have remained buoyant
according to 3Q16/17 data to March

Key Risks

● Public discontent with a rising cost of living could lead to instability that could lead a reversal of economic
reforms or worse, a return to violent and widespread protests that could destabilise the government and the
economy.

Economic Activity (Egypt 2012-2021)

Indicator 2012 2013 2014e 2015e 2016e 2017f 2018f 2019f 2020f 2021f
Nominal GDP, USDbn 259.5 255.0 296.7 317.7 269.3 187.6 237.5 277.0 311.4 347.7
Real GDP growth, % y-o-y 1.3 2.2 2.2 4.2 4.2 4.1 4.9 4.6 4.3 4.4
GDP per capita, USD 3,021 2,904 3,303 3,725 3,257 2,357 2,777 3,125 3,403 3,694
101.17 102.94 104.69
Population, mn 87.81 89.81 91.81 93.78 95.69 97.55 99.38

Unemployment, % of labour
12.7 13.2 13.0 13.0 12.5 12.0 12.0 11.0 11.0 10.0
force, eop
National Sources/BMI

For more information, please contact us at: enquiry@bmiresearch.com

+44 (0)20 7246 5170
For more information, please contact us at: enquiry@bmiresearch.com
+44 (0)20 7246 5170
Egypt Country Risk Report Published Date: 01 Jan 2018

Thank you for downloading BMI's latest views, we hope you found the information insightful.

To find out more about how the extensive views, analysis and forecasts contained in the full report will
help your company or to discuss your specific information needs please contact one of our experts on
+44 (0)20 7246 5170

For more information, please contact us at: enquiry@bmiresearch.com

+44 (0)20 7246 5170