In order to examine Egypt’s current economic landscape, and particularly the challenges—and opportunities—new political leadership faces, The Tahrir Institute for Middle East Policy (TIMEP) brought two leading experts in economic issues to Washington D.C. to offer presentations and inspire discussion. Mr. Angus Blair is the President and founder of the Signet Institute and brings us over thirty years of award-winning experience as an investment banker and economist. Mr. Justin Dargin is one of the world’s leading Middle East energy experts. He was a former Research Fellow with The Dubai Initiative/Harvard University. The event was moderated by Dr. Paul Salem, a vice president of the Middle East Institute leading an initiative on Arab transitions.
To open the event, Mr. Dargin spoke briefly on issues related to the energy sector in Egypt and the Middle East. He praised the steps that the Egyptian government has taken recently to address its energy shortage, but thinks that the country’s energy deficit will persist for some time. Egypt faces a dilemma of whether to meet its own domestic demand, or to export its hydrocarbon resources to continue to generate foreign currency. Mr. Dargin pointed out that the energy shortage is not directly related to the revolution; rather, it is the result of a long series of political decisions that drove energy policy. Mr. Dargin recommended that Egypt reform its pricing structure for energy as natural gas is currently sold below the cost of production. Mr. Dargin also noted that conservation (i.e., reducing waste) needs to be brought to Egypt, whether through government regulation of efficiency of appliances, through public awareness, or through price signals. He also urged cooperation with international energy companies in order to boost domestic production.
Mr. Blair took a broader perspective, looking at the economy as a whole and the effect political developments in Egypt would have on the economy. Mr. Blair believes Sisi’s overwhelming victory in the presidential election indicates broad support, but that support may evaporate if Sisi and the government fail to address economic concerns. Other political events—terror attacks, trials of Brotherhood figures, and fall parliamentary elections—will also have an effect on the economy.
Reviewing the course of economic development in Egypt since 2004, Mr. Blair noted that growth slowed in 2008 and shrank further after the revolution in 2011. The energy sector has shrunk for six quarters, and the collapse of tourism after the revolution has been a major drag on the economy. GDP growth, in Mr. Blair’s estimation, needs to surpass 7% annually in order to continue to provide improved living standards for a growing population; last year’s growth of less than 3% falls far short of that.
Mr. Blair identified bright spots in Egypt’s economy: food production, the retail sector, and banking. He noted several opportunities for growth, including continued agricultural expansion, banks having solid balance sheets, and low levels of household debt. Even government debt is largely denominated in Egyptian pounds, which will allow for de facto debt reduction as inflation continues. Remittances from abroad continue to sustain strong consumer demand, and the information technology sector is growing. Mr. Blair urged the new government to effect the needed reforms, and also pointed out the need for inter-ministry cooperation and discussion with international financial institutions. Throughout the talk, Mr. Blair noted the high level of human capital Egypt has, and offered praise for companies in the private sector.