During the period (1981-2006), the Egyptian national economy has flourished as a result of applying policies of economic reform, modernizing work mechanisms, realizing structural reform; as well as forgeing its way towards free economy besides liberating the Egyptian economy from all obstacles by means of issuing number of new laws in the fields of investment, taxes, and labour; in addition to developing performance in the fields of money market, stock market and banks.

 

Such developments have turned the Egyptian market into an investment-attracting market and developed the role of the private sector being vital and essential in giving a strong push to the Egyptian economy forward.

 

The Egyptian economy achieved a promising growth rate during (1981/82-2001/03) rose to about 4.7 percent. This reflects the success of the policies of economic reform adopted during that period. However, during 2002/03, such percentage witnessed a regression due to the international conditions and changes which negatively affected growth rates in different countries and subsequently affected the Egyptian economy.

 

The Egyptian economy succeeded in passing the economic slowdown as growth rate increased to 4.1 percent in 2003/04 and then to 4.9 percent in 2004/05; hence got its way towards economic recovery as growth rates reached 5.8% in 2005/06.

 

The 2006/07 plan aims to raise the economic growth rate to 6.6%. During the 25 previous years, the value of GDP had successively risen to reach LE 20.6 28 billion (at current prices and at production factor cost), of which the private sector contributed about 51%.

 

Gross Domestic Product (GDP) (at current prices) rose in 2005/06 to LE 558 billion, of which the private sector contributed about 62.9 percent of the GDP.

 

Average of per capita share of GDP (at current prices) increased from LE 534 in 1981/82 to about LE 7972 in 2005/06; an increase of 14.5 times during 24 years.

 

- Gross Domestic Production (at current prices and at production factor cost) in 1981/82 rose to about LE 35.189 billion. The public sector contributed LE 17. 631 billion and the private sector about LE 17.558 billion.

 

- Gross Domestic Production (at current prices) rose to about LE 915 billion in 2005/06. The public sector contributed about LE 298.8 billion and the private sector LE 616.3 billion with a percentage of 67.3%.

The economic growth is connected to the investment growth rate; the more the rate of investment increases at a percentage of the GDP, the better the performance of the national economy becomes. The period (1981-2006) witnessed the implementation of the economic policies which attract investment and encourage the private sector to participate by a developing role in the total implemented investments.

 

- Total volume of implemented investments rose to about LE 56.2 billion during the first five-year plan (1982-1989).

- Total volume of investments mounted to about LE 123.2 billion during the second five-year plan (1987-1992).

- Total volume of investments mounted to about LE 238.6 billion during the five-year plan (1992-97).

- Total volume of investments mounted to about LE 320.4 billion during the fourth five-year plan (1997-2002).

- Total volume of determined investments during the fifth five-year plan (2002-2007) mounted to about LE 449 billion, which equals eight- fold of implemented investments during the first five-year plan.

- Value of investments during (2002/03-2004/05) reached about LE 244 billion. Value of implemented investments reached about LE 113 billion during 2005/06.

 

 The private sector contributed by nearly LE 167 billion of the total investments of 2005/06. The year (2005/06) had witnessed the influx of the direct foreign investments that reached about US Dollar 3.3 billion during the first half of the year with an increase that reached 80% compared to the same period in 2004/05.

 

It is expected that direct foreign investments will reach US Dollar 5 billion dollars by the end of 2005/06. The establishment of the Ministry of Investment and the general structural investment reform has lead to the existence of an investment-attracting atmosphere as number of companies approved by Law No 159 of the year 1981 and of Law No 8 of the year 1997 reached 5771 with a capital reaching LE 416 billion in 2005.

 

Capital Market

The Egyptian bourse has realized a tangible progress especially during 2005/06. It joined the World Bourse Union to be the first Arab bourse in the Union. It started to apply the system of settling transactions in the same day of circulation and the system of electronic clearance. According to the IFCF, Egypt realized the first position among 32 markets.

 - The value of new issues of paper money rose to LE 64.9 billion in 2005, an increase of 14 times since 1993/94.

- Number of companies registered in bourse to 744 in 2000, capital of these companies increased from LE 14.5 billion in 1993/94 to about LE 643.9 billion in 2005.

- The average value of daily circulation in bourse increased from LE 3.8 billion in 1993/94 to about LE 643.9 billion in 2005.

 

The financial sector has witnessed number of essential reforms that resulted in developing performance levels especially after adopting flexible policies that aim to activate market dealings, encourage investment and control inflation.

 

The year 2005/06 had witnessed the restructuring of some banking entities and the encouragement of union operations after identifying issued and paid capital to be not less than LE 500 million so as to establish strong banking entities capable of local and world competition. Such policies resulted in the rise of value of foreign currency deposits to reach US Dollar 26.7 billion as well as the increase of net international reserves of the Central Bank to US Dollar 21.89 billion.

 

(1) Estimated according to the average price of the Inter-bank by the end of December, 2005.

 

During the period 1981-2006, end-use consumption has increased; the matter that reflects the continuing rise in the standard of living of citizens. A comparison between figures for 1981/82 and 2005/06 shows the following results:

- Total service expenditure mounted from LE 3.5 billion to about LE 114.8 billion.

- Grand total of household consumption mounted from LE 14.4 billion to about LE 414 billion.

- Grand total of governmental consumption rose from LE 3.5 billion to about LE 74.1 billion.

- Grand total of end-use consumption rose from LE 18 billion to about LE 488.1 billion.

                                                                                                    (LE billion)

Commodity exports represent a source of hard currency and commodity imports play a main role in providing citizens with their basic needs as well as economic activities prerequisites from intermediary and consumer commodities. The period (1981-2006) had witnessed great development in the competitiveness of Egyptian products, as well as the realization of number of economic agreements that enhance integration of the Egyptian economy into the global economy through Egypt's cooperation with international and regional economic blocs; in addition to rationalizing exports in accordance with Egypt's basic needs.

 

These practices have resulted in realizing a surplus in current dealings balance and an increase in international needs plus a relative increase of the significance of foreign trade in Gross Domestic Product (GDP).

 

A comparison between the year 1981/82 and the year 2005/06 shows the following:

- Volume of commodity exports mounted from US Dollar 4.1 billion to about US Dollar 16.6 billion.

- Volume of commodity imports mounted from US Dollar 9.1 billion to about US Dollar 27.65 billion.

- Trade balance deficit rose from US Dollar 5.1 billion to about US Dollar 11.2 billion.

 

The results of current dealings during (1981/82-2005/06) showed an increasing surplus in the balance of payment. Hard currency revenues increased and the deficit ratio of commodity and services balance decreased.

- Current revenues increased from US Dollar 9.6 billion to about US Dollar 38.9 billion.

- Total of commodity imports rose from US Dollar 9.3 billion to about US Dollar 27.8 billion.

- Total of service payments rose from US Dollar 1.5 billion to about US Dollar 6.3 billion.

- Total of paid revenues declined from US Dollar 1 billion to about US Dollar 1200 billion.

- Stock in hand of service balance rose from US Dollar 74 billion to about US Dollar 9200 billion.

- Stock in hand of services and commodities balance turned from a deficit of US Dollar (-4.4) billion to US Dollar –(2070) billion.

- Stock in hand of the current dealings and remittances turned from a deficit of US Dollar (-2.3) billion to a surplus of about US Dollar 3.5 billion.

 

Although population rate doubled during the period (1981-2006), the home trade sector managed to realize the needed balance. This period did not witness food-stuff crises as the state policy continued to provide necessary subsidies to support the low-income categories.

 

 The value of subsidies doubled to about nine-fold. 16.5 percent of total governmental spending in 2005/06 was allocated so as to subsidize commodities and essential services.

 

- Supporting bread subsidy rose from LE 81 million to about LE 7.1 billion.

- Supporting supply subsidy rose from LE 97 million to about LE 9.7 billion.

- Supporting electricity consumption rose from LE 100 million to about LE 23.1 billion.

- Supporting petroleum products rose from LE 50 million to about LE 3.2 billion.

   

                                                                                                    (LE billion)

 

- Home trade sector's share in domestic production (current prices) rose from LE 4.2 billion in 1981/82, to LE 86.1 billion in 2005/06.

- Trade sector's contribution in GDP (at current prices) rose from about LE 2.6 billion in 1981/82 to about LE 61.3 billion in 2005/06.

*Egyptian Achievements, Council of Ministers, April 2006.

*Estimated

*Source: Egyptian Achievements, the Central Egyptian Bank

1 Egyptian Achievements, Central Egyptian Bank

*Socio-Economic Development Plan, 2000/01

 

** Socio-Economic Development Plan, 2006/07

*Estimated

**Egyptian Achievements (Ministry of Social Solidarity- Ministry of Finance), April 2006.