Paper
Ibrahim Saif, Ahmed Ghoneim
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Source: Getty
The Global Slowdown and Egypt's Economy
The overall impact of the global downturn on Egypt is that it creates deflationary expectations. As a result, domestic and foreign investors prefer to wait until the dust settles before they make their investment decisions.
By Ibrahim Saif
Published on Dec 12, 2011
What effect has the global slowdown had on Egypt's economy during its political transition?
The overall impact of the global downturn is that it creates deflationary expectations. As a result, domestic and foreign investors prefer to wait until the dust settles before they make their investment decisions.
The global slowdown has had a negative impact on the inflow of foreign investment, from both the Gulf countries and the broader international market. This has been associated with a decline in worker remittances, which constitutes nearly 10 percent of Egypt’s national economy.
The global slowdown has had a negative impact on the inflow of foreign investment, from both the Gulf countries and the broader international market. This has been associated with a decline in worker remittances, which constitutes nearly 10 percent of Egypt’s national economy.
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Moreover, tourism—a significant sector in Egypt employing almost one-quarter of the labor force—has been crippled by a combination of the global slowdown and security concerns.
Exports of goods have declined as a result of a declining global demand and a decline of government support for exporters, including low tax rate and credit lending. The cost of lending, in terms of the borrowing interest rate, has reached nearly 11 percent, which is extremely high especially with the high degree of instability.
All of this has resulted in a tight lending policy at a time when liquidity is most needed, hence complicating the transitional period.
Exports of goods have declined as a result of a declining global demand and a decline of government support for exporters, including low tax rate and credit lending. The cost of lending, in terms of the borrowing interest rate, has reached nearly 11 percent, which is extremely high especially with the high degree of instability.
All of this has resulted in a tight lending policy at a time when liquidity is most needed, hence complicating the transitional period.
About the Author
Ibrahim Saif
Former Senior Associate, Middle East Center
Saif is an economist specializing in the political economy of the Middle East. His research focuses on international trade and structural adjustment programs in developing countries, with emphasis on Jordan and the Middle East.
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Carnegie does not take institutional positions on public policy issues; the views represented herein are those of the author(s) and do not necessarily reflect the views of Carnegie, its staff, or its trustees.
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