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Economic System in Egypt: Essay
Egypt has one of the longest histories of any other nation, tracing its heritage until the sixth or fourth millennium BC. Egypt saw some of the earliest developments in writing, agriculture, urbanization, organized religion, and central government. The Egyptian economy depends mainly on agriculture, telecommunications, oil and natural gas exports and the tourism industry. Also, more than three million Egyptians are working abroad, mainly in Saudi Arabia, the Persian Gulf and Europe, who send remittances to the country, as well as revenues from the Suez Canal.
The Egyptian Pound (EGP) is the official currency of the Arab Republic of Egypt, as designated by ISO 4217. Also, the pound’s symbol is E£.
The unemployment rate had a significant change in 2017 to 2018 due to the ongoing national megaprojects. The public sector has been making several efforts such as Suez Canal expansion, road extensions, and New Administrative Capital, which have employed thousands of Egyptians.
In 2001, began a managed float that continued until 2016, which made its currency reduced its value by almost 50% against the dollar. As an example of the continued deterioration of the EGP’s value, as of May 2018, the exchange rate was 17.6 Egyptian pounds to every dollar. Since the 2016 devaluation, the Central Bank of Egypt has taken several steps to shore up EGP and the Egyptian economy as a whole. In April 2018, the government announced a reduction in interest rates, the second 1-percent rate cut in two months, meant to attract investments from home and overseas.
Egypt has received foreign aid from the United States since 1979 (an average of $2.2 billion annually) and is the third largest beneficiary of such US aid funds after the Egyptian society is moderately unequal in terms of the income distribution, and it is estimated that between 35-40% of the country’s population earns less than the equivalent of two dollars a day, while only about 2-3% could be considered rich. Also, Egypt is among the poorest and youngest nations across the Arab world. As the economic conditions deteriorate, consumers spend more time finding better deals and shopping at informal outlets nearby. Lastly, despite Egypt having the largest population of Internet users in the MENA region, only 8% of Internet users are reported to make online transactions.
The country’s economic conditions have started to improve considerably after a period of stagnation due to more liberal government policies, rising tourism revenues, and a rising stock market. Foreign direct investment (FDI) in Egypt increased considerably before the fall of the Hosni Mubarak regime, surpassing $ 6 billion in 2006 due to liberalization and privatization. Since the fall of Hosni Mubarak during the 2011 Egyptian Revolution, the country has experienced a drop in investment and foreign tourist revenues, followed by a 60% drop in foreign exchange reserves, a three percent drop in growth and a rapid devaluation of the Egyptian pound.
One of the actions that the new government is doing is shut down a mechanism that assures that foreign investors can repatriate their external currency earnings. Thereby, this move could mean more volatility for the stagnant Egyptian pound.
Egypt’s external debt is reportedly approaching the $90 billion mark. In terms of gross domestic product, the external debt had reduced from 2017 to 2018 but still a significant debt. The government is using a strategy to reduce the inflation rate and this strategy might have proven effective but it exposes the economy to the risk of an external debt default if it keeps growing at this current rate for a few more years.
The economy of Egypt was a highly centralized economy under President Gamal Abdel Nasser and remains an autocracy with a political regime undergirded by a powerful, economically-influential military. In the 1990s, a series of International Monetary Fund arrangements, coupled with massive external debt relief resulting from Egypt’s participation in the Gulf War coalition, helped Egypt improve its macroeconomic performance.
Since 2000, the pace of structural reforms, helped Egypt move towards a more market-oriented economy (more private) and prompted increased foreign investment. The reforms and policies have strengthened macroeconomic annual growth results due to public investments, private consumption, and exports of goods and services. These practices are creating jobs and changing the unemployment rate scenario.
Overall level of economic development Egypt is one of the most developed countries in Africa, it has the 2nd largest economy (behind Nigeria) in terms of GDP total nominal and is relatively stable. The country results in economics are getting better among the years. However, still is classified as a developing country in the world.
In conclusion, Egypt is an interesting country to invest especially in services that are an industry that is growing fast. Also, is considered a stable country in base on his credit rating by Moody’s S&P, and Fitch and the GDP is getting better every year with the new government since 2016.
References
- https://pt.wikipedia.org/wiki/Egito#Turismo
- https://www.investopedia.com/terms/e/egp.asp
- https://www.bbc.com/news/business-37857468
- https://egyptianstreets.com/2019/05/01/employment-rate-in-egypt-rises-to-90-1-capmas-report-reveals/
- https://en.portal.santandertrade.com/analyse-markets/egypt/reaching-the-consumers
- https://pt.wikipedia.org/wiki/Egito#Turismo
- https://www.investopedia.com/terms/e/egp.asp
- https://www.bbc.com/news/business-37857468
- https://egyptianstreets.com/2019/05/01/employment-rate-in-egypt-rises-to-90-1-capmas-report-reveals/
- https://en.portal.santandertrade.com/analyse-markets/egypt/reaching-the-consumers
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