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Egypt: Market Profile

Major Economic Indicators

Table: Major Economic Indicators (Egypt)
Table: Major Economic Indicators (Egypt)

Latest Developments

  • Egypt’s GDP growth was maintained at 4.3% in 2016, though a slightly lower growth of 3.5% is projected for 2017.
  • Average consumer price inflation hit a high at 30% YOY over the first half of 2017, substantially weakening household spending and hindering consumption growth.
  • In November 2016 the Central Bank of Egypt floated the Egyptian pound to quality for IMF loan. As of December 2016, the currency dropped around 60% against US dollar year-or-year (YOY), reaching historic lows.
  • Egypt’s FDI inflow reached US$8.1 billion in 2016, up 17% from US$6.9 in the previous year.
  • Egypt’s exports grew 19.3% in 2016 to US$25.5 billion while imports fell 12.2% to US$55.8 billion during the same period.
  • Hong Kong’s exports to Egypt contracted by 29.8% YOY to US$233 million in the first seven months of 2017, while imports from Egypt rose 68.9%YOY to US57 million in the same period.

Current Economic Situation


Egypt is one of the most developed and diversified economies in the Middle East. Service contributes about 45% of the Egyptian GDP, with finance and insurance, wholesale and retail trade sectors being the key service industries. Agriculture contributes another 15% of GDP while industry including the manufacturing and extractive sectors takes up the rest of GDP.

While Egypt has rebuilt order after the Arab Spring under military rule, the country’s underlying structural weaknesses and prolonged political transition have led to the build-up of macroeconomic imbalances, marked by spiking inflation and high unemployment.

After four years of negotiation, the Egyptian government reached a preliminary agreement with the IMF on a loan of US$12 billion loan in November 2016. To qualify for IMF financial assistance, the Central Bank of Egypt (CBE) gave up the pegged currency regime in favour of a floating Egyptian pound on 3 November 2016, which will help Egypt’s external competitiveness, support exports and tourism, and attract foreign investment. The currency had dropped by about 60% against the US dollar to hit historic lows of to 19.7 Egyptian pound per US dollar in December 2016. The IMF indicated in January 2017 that the Egyptian pound was trading at genuine equilibrium exchange rate after the November float. 

In gaining access to IMF loans, Egypt has undertaken to adopt economic reform and structural adjustment programme to restore investors’ confidence and revive Egypt’s economy. Major measures include liberalising Egypt’s exchange rate system, reducing energy subsidies, improving ease of doing business, supporting SMEs, introducing the value-added tax (VAT) and strengthening social security. Egypt’s economy expanded by 4.3% in 2016, with the IMF projecting GDP growth slowdown of 3.5% for 2017 following the implementation of reform programmes. With macroeconomic stability being restored and fiscal condition improving, which is conducive to investment, consumption will remain weak amid elevated inflation to suppress GDP growth.

In November 2016, the Egyptian government announced to further delay the introduction of capital gains tax on equity for three more years to attract foreign investors. A five-year income tax relief for new agricultural and manufacturing investments in Upper Egypt and discounts on land prices in new urban centres were also introduced.

Currency depreciation and removal of fuel subsidy in 2016 drove yearly inflation to 10.1%. Inflation further hit a high at 30% year-on-year (YOY) in the first half of 2017, substantially weakening household spending and hindering consumption growth. The IMF projected yearly inflation rate of 22% for 2017.

Egypt is reliant on external financing and foreign aid to drive its economic development. In April 2015, France signed contracts worth US$1.5 billion with Egypt on various transport and electricity projects. Besides, President Sisi is actively courting aid and investment from Asia including China, Japan and Korea. In January 2016, China announced loans of US$1.7 billion to Egypt alongside US$15 billion of energy, infrastructure and construction projects in Egypt awarded to Chinese companies. In addition to seeking the IMF loan of US$12 billion, Egypt signed a currency swap deal with China for about US$2.6 billion in December 2016 to pop up its official reserves.

Tourism, an important economic pillar of Egypt, has been severely hit by political instability since the Arab Spring. Tourism of Egypt gradually starts to recover in 2017, thanks in large part to the lifting of travel bans by most European countries and concerted promotional campaigns. Inbound tourists amounted to 3 million in the first five months of 2017, increasing by 50.7% YOY. Tourist arrivals were up in Q1, thanks in large part to the lifting of travel bans by most European countries and concerted promotional campaigns.

In 2015, Egyptian government announced the plan to develop a new capital city east of Cairo (of a size of 706sq km) to resolve the current problems of over-crowding, pollution and rising house prices in Cairo. Chinese capital is seen as an important funding source of this megaproject. The China Fortune Land Development Company has signed an agreement to provide US$20 billion for this development. In February 2017 the Egyptian government started to invite construction companies and real-estate developers to bid for plots in the new capital city. China’s AVIC International and China Railway Group Limited has signed a deal of about US$1.2 billion to build a fast tram transit system to connect Greater Cairo to the new capital.

External Trade

Egypt relies heavily on oil exports (about 40% of total exports), and the country’s other major export items include cotton, textiles and agricultural products. Egypt’s exports grew 19.3% in 2016 to US$25.5 billion, with strong growth also expected in 2017 amid the sharply lower Egyptian currency. During the same period, imports fell 12.2% to US$55.8 billion due to drastic currency depreciation. Egypt imports machinery, equipment and food mostly from China, Germany and the US.

Investment Policy

While regaining political stability, Egypt welcomes FDI and provides various incentives such as tax exemptions. General Authority for Investment and Free Zones is the government body responsible for foreign investment.

The Suez Canal Corridor Area Project

The Suez Canal, which connects the Mediterranean Sea with the Red Sea, is the world’s oldest artificial waterway. With a view to meeting increasing the canal’s daily capacity from 49 vessels in 2014 to 97 in 2023, and spurring Egypt into an international trading and logistics hub, the Egyptian government rolled out a mega infrastructure project called the Suez Canal Corridor Area Project (SCCAP) in August 2014, which will include the development of industrial estates, technology parks, and infrastructure, aside from constructing a new 35-km canal section. The new canal is expected to increase the traffic revenue of the canal from US$ 5.3 billion in 2015 to US$15 billion in 2023, with the SCCAP expected to spur foreign investment and create jobs.

Foreign Direct Investment

Egypt’s FDI inflow reached US$8.1 billion in 2016, up by 17% from US$6.9 in the previous year.

Major FDI sources included the UK, the UAE and the US. China’s cumulative FDI in Egypt was US$663.1 million as at end-2015.

Table: Egypt’s FDI inflow due to China
Table: Egypt’s FDI inflow due to China

Trade Policy

Egypt has gradually moved towards a more liberal trade regime. It became a member of the World Trade Organisation (WTO) in 1995, and revamped its tariff regime in 2004 as agreed in its accession agreement. The changes in the tariff structure lowered the official tariff rate (weighted average) from 14.6% to 11.8%. According to the WTO, Egypt’s MFN trade weighted average tariff was 11.8% in 2013. More than 88% of agricultural products and 86% of non-agricultural items on the tariff schedule are now charged at less than 15%.

As a measure designed to protect the local automotive industry, imported vehicles are subjected to a tariff ranging from 40%-135%, depending on the engine size. Vehicles with engines over 2,000cc are subject to an additional sales tax of up to 45%. The Presidential Decree 25 of 2016 also significantly increased import tariffs on a wide range of products such as household appliances, electronic devices, clothing, shoes, watches and some agricultural produce.

Egypt requires restrictive labeling for imports of food products. All food products should be packed in appropriate packages, which should be clean, intact, and odourless so as to preserve the products and not affect its characteristics. Imported products must be marked and labelled in Arabic. The language requirement is mandatory for all information, including the brand and type of the products, country of origin, date of production, expiry date, and instructions on handling products. For imported tools, machines and equipment, a user manual in Arabic has to be attached.

There are a total of ten free trade zones in Egypt – Cairo (Nasr City), Alexandria, Port Said, Suez, Ismailia, Damietta, Media, Shebin El-Kom, Qeft and Port Said East Port. Goods exported from or imported into the free zones are not subject to normal import/export customs procedures, duties or other taxes and fees. Likewise all instruments, machinery, equipment, and transportation equipment necessary for establishments authorised within the free zones are exempt from customs and duties.

The EU-Egypt Association Agreement entered into force in June 2004. The EU lifted all trade barriers to Egyptian industrial exports, while Egypt committed itself to removing all related trade barriers over a 12-15 year transitional period. In June 2013, the EU and Egypt began an exploratory dialogue on deepening the bilateral trade and investment relations through the possible negotiation of the Deep and Comprehensive Free Trade Agreement (DCFTA). It will extend largely beyond the existing Association Agreement.

Besides the Association Agreement with the EU, Egypt has signed a number of free trade agreements (FTAs) to help Egyptian exports gain preferential access to markets of the signatories. Such FTAs include the Greater Arab Free Trade Agreement (GAFTA, with 17 members including Egypt), the Common Market for Eastern and Southern Africa (COMESA, with 19 members including Egypt), the Agadir Agreement (with Egypt, Morocco, Tunisia, and Jordan as members), MERCOSUR-Egypt FTA (with Argentina, Brazil, Paraguay and Uruguay), EFTA – Egypt Free Trade Agreement (with Iceland, Liechtenstein, Norway and Switzerland) and the Egypt-Turkey FTA. Egypt has also signed bilateral trade agreements with Lebanon, Syria, Morocco, Tunisia, Libya, Jordan and Iraq.

Egypt is also negotiating trade agreements with various countries and regions, including Nigeria, Tanzania, India, Sri Lank, Russia, the West African Economic and Monetary Union (UEMOA) and the CEMAC Group (including Cameroon, Central African Republic, Chad, Congo, Gabon and Equatorial Guinea).

Egypt also enjoys Generalised System of Preferences (GSP) status provided by Australia, Canada, Japan, Kazakhstan, New Zealand, Russia, Turkey and the US. Preferential tariff and duty-free treatment on certain items are granted to Egypt by these countries. 

Hong Kong Trade with Egypt

Hong Kong's total exports to Egypt fell 29.2% to US$233 million in the first seven months of 2017. Major exports in the period included telecom equipment and parts (US$175 million, 75.4% of total, -26.3% YOY), computers (US$8 million, 3.4% share, -66% YOY), and tulles, lace, embroidery, ribbons, trimmings and other small wares (US$4 million, 1.8% share, +59.5% YOY).

Hong Kong's imports from Egypt increased 68.9% to US$57 million in the first seven months of 2017. Major imports in that period were fruit and nuts (not including oil nuts), fresh or dried (US$39 million, 69.6% share, +138.7% YOY), hides and skins (except furskins), raw (US$4 million, 7.1% share, +42.8% YOY), and glassware (US$2 million, 3.8% share, -29.2% YOY).

Table: Hong Kong Trade with Egypt
Table: Hong Kong Trade with Egypt

In the first half of 2017, a total of 6,457 Egyptian visitors came to Hong Kong, a decrease of 24.3% from the same period of 2016.

More Information

More information on the Belt and Road countries’ economic and investment environment, tax and other subjects that are important in considering investment and doing business are available in The Belt and Road Initiative: Country Business Guides.

Content provided by Picture: Kenix Lee