Khalid Ikram, The Egyptian Economy, 1952–2000 Performance Policies and Issues, Routledge studies in Middle Eastern economies

One of the biggest challenges in Egypt is the difficulties posed by the combination of the limited arable land and rapidly increasing population. From 1960 to 2000, the GDP growth fluctuated, resulting in low, moderate, and high growth periods.

1965 and 2000, the growth of GDP at 1992 market prices averaged

nearly 5.2 percent a year”. “Population growth over the same period averaged 2.4 percent a year, and annual growth in per capita income was of the order of 2.7 percent” While late 1970s and early 1980s saw fast economic growth thanks to the returning oil fields combined with high oil prices, the end of the decade is marked by falling oil prices and overall stagnation.

Overall, services sector had the biggest share in the GDP. While the share of agriculture declined steadily –partly due to Egypt’s limited arable land, as mentioned above-, manufacturing contributed generally around 20 percent, with no long-term increase. Within the services sector, tourism played an important role although its full impact is difficult to identify due to the very nature of the sector. Ikram also argues that the GDP growth in Egypt has been closely connected with the amount of investment, which in turn was strongly correlated with the prevailing economic policies and the international situation in the Middle East. Another factor that greatly fluctuated in the period between 1965 and 2000 was the relative shares of public and private investments.1 This is hardly surprising, given

Khalid Ikram, The Egyptian Economy, 1952–2000 Performance Policies and Issues, Routledge studies in Middle Eastern economies, p. 92

female unemployment is higher than male unemployment. since oil production is very capital-intensive. it can be seen that young and relatively educated were disproportionately affected by the unemployment. As for investment. especially in urban areas. 94 3 Khalid Ikram. 1952–2000 Performance Policies and Issues.4 2 Khalid Ikram. the relationship between the increase in employment and output largely fluctuated in different periods. p. the growth propelled by oil revenues did in fact decrease the ratio of output to employment. Routledge studies in Middle Eastern economies. 100 . while that of the agriculture steadily declined. p. When one looks at the data in detail.3 Between 1960 and 2000. the proportion of employment created in services sector constantly grew. however. Ikram argues that between 1960 and 2000. Egyptian government too focused on creating job opportunities as it is the most effective way to eradicate poverty. The Egyptian Economy. while manufacture hovered around 20% of all jobs throughout the same period. p. As in all developing countries. 1952–2000 Performance Policies and Issues. The Egyptian Economy. The Egyptian Economy. which first concentrated on growing through large scale government investment in a “socialistic” fashion. 1952–2000 Performance Policies and Issues. first with the opening policies of 1970s. These findings present a different picture of unemployment that is in place in Egypt. then with the structural adjustment reforms of the 1990s.2 Furthermore. Routledge studies in Middle Eastern economies. Routledge studies in Middle Eastern economies.Egypt’s rather indecisive course in economics. The unemployment substantially rose until the second half of the 1990s. growth in Egypt has traditionally been achieved through capital formation. with no observable effect occurring through growth in total factor productivity. with thereafter more focus on private investment as a motor of growth. Furthermore. the increase in labor force is not matched by the increase in employment. 96 4 Khalid Ikram. For instance. after which the economy partly recovered.

5 percent. it had a negative effect. 117 . 1952–2000 Performance Policies and Issues. Analyses showed that low output in Egypt was not only due to low inputs. growth in human capital-adjusted labor about one-third. The Egyptian Economy. capital accumulation contributed about two-thirds of the growth in real GDP.2 percent during 1965–2000. p. etc. The ratio of merchandise imports to merchandise exports were on the average between 2. which recovered in the second half of the decade by post-Six Day War reconstruction and the effect of the opening period labeled “infitah”. Routledge studies in Middle Eastern economies. Egypt’s balance of payments was severely disrupted by structural weaknesses. Until mid-1970s. The Egyptian Economy. what affected the economic growth the most during this period was Egypt’s efforts at containing the account deficit. Routledge studies in Middle Eastern economies. The Egyptian Economy. which cost in under-used capital stock and higher unemployment than would otherwise be decreased. 1952–2000 Performance Policies and Issues. thus the difference 5 Khalid Ikram. 106 6 Khalid Ikram. therefore. but also due to low efficiency caused by lack of education. This led to the restriction of imports. p. TFP fell again in the 1980s and 1990s.6 Overall. Over the entire period 1965–2000.6 percent – during the same period. Routledge studies in Middle Eastern economies.“While Egypt’s GDP grew by an average rate of 5. must be seen as the ultimate constraint on Egypt’s growth during this period”. 106 7 Khalid Ikram. physical capital grew by about 7. 1952–2000 Performance Policies and Issues. p.5 and 3.”5 Total factor productivity (TFP) was not effective overall.7 Throughout this period (1965-2000). human capital-adjusted labor increased by an annual average of 3. In Ikram’s words: “The balance of payments. only to slightly recover before the end of the millennia.5 percent – and employment by 2.

120 . and finally. “Throughout this period.convergence with the West did not bring Egypt a healthy economic situation which it needed to sustain its leading role among the Arab countries and the Middle East. Thus. foreign assistance has been of utmost importance to keep the budget in balance. The large and increasing divergence between imports and exports became most noticeable after 1974. tourism. p. Suez Canal and remittances. the state could not foster development of non-oil industries. which resulted in heavy reliance in cotton prior the return of the Sinai oilfields –cotton is a traditional product that was important at least as early as Muhammad Ali Pasha era (first half of the 19th century) so Egypt can be said to have replaced one traditional. p. 8 Khalid Ikram. 1952–2000 Performance Policies and Issues. 117 9 Khalid Ikram. Since imports from early in the period became substantially higher than exports and continued to grow at a significantly faster rate. 8 Some notable trends in the balance of payment: Egypt financed its gap through services export.was financed by Egypt’s main hard currency earning sectors such as oil. which saw the West’s importance rising and that of Eastern Europe dramatically declining. imports grew much faster. The Egyptian Economy. The Egyptian Economy. Egypt’s external trade shifted markedly after the 1970s. primary product with another in the 20th century. when the greater availability of foreign aid enabled a larger expansion in the volume of imports . Routledge studies in Middle Eastern economies. Egypt had to live with a constantly negative account balance for much of its modern life. Routledge studies in Middle Eastern economies.”9 In other words. 1952–2000 Performance Policies and Issues. until the debt rearrangement of the second half of the 1990s. the economic –as well as political.

dropping from 11. . and thus lost considerable ground in the international market.2 percent in 1965 to 6.5 percent in 2000. The country could not grow its production and exports in parallel with the global averages. In sum. The ratio reflected the performance of oil sales. The reduction internationally was paralleled by the decreasing significance of exports in the GDP. showing a clear decline.During the same period. Its share fell from 37 cents per every $100 of world trade in 1965 to 7 cents per every $100 in 2000. Egypt clearly could not keep up with the increase in world trade. Egypt missed the chance to become an exporting country and suffered below average growth and improvement in total and per capita GDP throughout the period.9 percent in 1981 when international oil prices reached their peak. for example. there was an upward blip to 12.