The recent political instability in Egypt has had a significantly negative impact on the country’s economy. Travel warnings from Western governments threaten the country’s usually-reliable tourism industry, the Egyptian pound is at an unprecedented low and the budget deficit has risen to 11% of GDP. As TIME magazine reports, the country’s economy is in ‘free fall’.
What does the future hold for Egypt’s economy, both in the short-term and in the long-term? Here’s a brief overview of what’s on the horizon.
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Egypt’s Own ‘Marshall Plan’
Ziad Bahaa El-Din, Egypt’s Deputy Prime Minister for Economic Affairs, is currently looking at ways to revive the country’s flailing economy. In addition to taking immediate steps to remove red tape and restore the confidence of foreign investors, he recently discussed developing a ‘Marshall Plan’ for Egypt.
To attract aid and investment from Gulf countries, as well as those further afield, this plan could involve making massive changes to Egypt’s infrastructure. Bahaa El-Din discussed the possibility of potentially upgrading everything from power plants to bridges. Not only would a project on this scale hopefully inspire foreign investments, but it would also create hundreds of thousands of jobs in construction and maintenance.
Throughout this period of economic instability in Egypt, certain markets have remained resilient. For example, the building supply and food production industries have both experienced continued demand, despite the national downturn.
Success within the building industry has been linked to the country’s large population of young adults seeking a family home. Also playing a role is the belief among many Egyptians that real estate is a far safer investment than those more closely linked with the suffering Egyptian pound.
The existence of resilient markets within the floundering Egyptian economy bodes well for the country’s recovery. It’s indicative of the relative maturity of Egypt’s economy compared to elsewhere in the region.
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The global economic downturn over the past decade, exacerbated in Egypt by on-going political instability, may also influence spending and saving habits among the nation’s emerging consumer groups. The country’s economic struggles could inspire a greater trend of conservatism among younger generations – particularly those just entering the professional world.
Just as experts predict that American millennials will learn from the financial crisis of 2008 and develop savvier borrowing behaviour, Egypt’s economic woes could have a similar effect on its younger generations. For example, savings accounts in Egypt may start to seem more attractive than personal loans and mortgages.
Whilst this conservatism may reduce the chances of a quick recovery, with Egyptians being less keen to spend, it may lead to a more stable economy for Egypt in future.
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Photo Credit: ScienceDaily.com