Economic growth in eygpt - Assignment Example

Economic Growth in Egypt Economic Growth in Egypt The IHS report on economics and country risks on Egypt published on January27, 2015 offers intriguing information about the economic growth in Egypt. The ISH opines that Egypt has registered a slow economic growth in the last few quarters as it ventures in a recovery process after a period of economic challenges due to political instability. The reports reveal that Egypt Foreign Reserve position has registered a measure of stability, although there is still a level of uncertainty. Additionally, Egypt’s inflation rates have gone down as highlighted by weaker commodity prices in the recent quarters. Egypt’s economic growth still faces numerous risks with high political, economic, and security risks. The country also registers a significant tax and oppression risk and medium legal risks. However, the country seems to be on a positive trend despite the evident risks. The forecast summary presented in the report highlights that the country’s economic outlook is better due to the political stability resulting from the May 2014 elections. The country is also experiencing an unexpected rate cut by the central bank of Egypt, a factor that defines Egypt’s highly dynamic economic environment. Worth noting is the fact that the exchange rate risks in Egypt have also soared immensely (Country Reports: Egypt, 2015).
The IHS report predicts that Egypt’s economic growth is likely to register acceleration in the medium term outlook. However, the long-term economic growth may be adversely affected by the risks mentioned above. The Country’s Gross Domestic Product (GDP) has also surged in the first quarter and is likely to improve because of the political stability witnessed after 2014 elections. The country also receives financial aids from the Gulf countries. According to the report, the consumer demand is likely to face challenges because there is still an ongoing crisis. In case of capital investment, the country will register reduced inflows of foreign direct investment because of the political and security risks. However, more direct investment from foreign countries may be registered in the future when the country’s economic landscape stabilizes. Although the government is making efforts to promote foreign investments, political uncertainties are serving as a backlash (p. 10). Egypt’s labor market reveals that the conditions will be poor in the short-term until there is economic stability.
Egypt’s inflation rates are likely to reduce because commodity prices have decreased remarkably. As mentioned above, the country’s exchange rates face increased risks while the foreign reserve position seems to register a measure of stability. A close analysis of the country’s fiscal policy reveals that the public finances are not expected to strengthen until the country recovers fully from its economic challenges and political instability. Government revenues will register limited growth because the tourism industry has been affected by political instability. The country also registers low taxes from fuel, a factor that minimizes government revenues. The external sector is expected to exhibit continued pressure because of slower economic growth as Egypt struggles to overcome political instability. The key sectors of Egypt’s economy include natural gas, telecoms, construction, tourism, and steel. Other industries such as banking and related financial related industries, as well as retail trade are also expected to contribute immensely to Egypt’s economic growth (p. 18).
Reference
Country Reports: Egypt. (2015). Egypt Country Monitor, 1-19. Read More