Egypt should continue enacting reforms to fuel growth

Investing in African Continental Free Trade Area could help country diversify its economy, new report says

Egypt should continue enacting effective reforms to achieve more economic progress. Dana Smillie/The National

Egypt, the Arab world’s most populous country and an economic heavyweight in Africa, should continue enacting effective reforms to achieve more economic progress and boost growth, a new report says.

The report, titled “Production transformation policy review of Egypt”, stresses three important aspects that could help the country achieve more economic development. This includes investing in the African Continental Free Trade Area (AfCFTA), engaging the private sector in innovation and effective policymaking.

Despite being the continent’s top manufacturing hub, Egypt currently trades little with other African economies. Only 15 per cent of its goods that are exported are traded on the continent and AfCFTA could be a game-changer, the report says.

“The African Continental Free Trade Area (AfCFTA) entered into force in 2019 and when fully implemented will create an integrated market of 1.2 billion people,” the report said.

“The AfCFTA is expected to add 32 new FTA partners for Egypt, providing opportunities to add scale to Egypt’s exports and to connect Egypt to traditional partners in Europe and the Middle East as well as to the overall global market.”

Engaging the private sector could also be beneficial in boosting growth prospects, the report showed.

“The country should increase public support for innovation to all firms across all sectors, leveraging existing tools, such as the ones managed jointly by the Industrial Modernisation Centre and the Science and Technology Development Fund,” it said.

Egypt also launched the National Structural Reforms Programme (Nsrp) in April 2021 under the auspices of the Ministry of Planning and Economic Development. It aims to achieve balanced and sustainable growth in light of national and international developments, such as the Covid-19 pandemic and the global transformation towards digital and green technologies.

The country plans to raise the real gross domestic product growth rate to between 6 and 7 per cent in 2023/24, from 3.6 per cent in 2019/20.

“Egypt has a strong leadership, a vision for the future and an established system for coordination among institutions at the top level,” the report said.

“In the future, the country would benefit from updating the policymaking process by increasing coordination capacities also beyond the higher echelons and within institutions. Egypt would also benefit from rationalising and strengthening implementation institutions.”

The Egyptian economy has fared better than other Mena economies despite last year's coronavirus-induced headwinds. It is the only country in the region whose economy grew in 2020, the World Bank said.

Africa's second-largest economy is expected to expand by 2.8 per cent in the fiscal year ending June 30, 2021, and accelerate by 5.2 per cent during the 2021 to 2022 financial year, the International Monetary Fund reported.

The report was issued by the Development Centre of the Organisation for Economic Co-operation and Development (OECD) in collaboration with the UN Conference on Trade and Development, the UN Economic Commission for Africa (ECA) and the UN Industrial Development Organisation (UNIDO).