The Annual Economic Bulletin FY2020/21

The Annual
Economic Bulletin
FY2020/21
2
TABLE OF CONTENTS:
1. GLOBAL OUTLOOK
1.1. Global Growth
1.2. Global PMI
1.3. FAO Food Price Index (FFPI)
1.4. Global Oil Price
1.5. Global Inflation
1.6. Egypt Positioning on the Global and Regional Maps
2. ECONOMIC GROWTH
2.1. Real GDP FY 2020/21
2.2. Private Consumption
2.3. Government Expenditure
2.4. Investments
2.5. Imports & Exports
2.6. Sectoral Analysis
2.6.1. Suez Canal
2.6.2. Tourism
2.6.3. Agriculture
2.6.4. Manufacturing
2.6.5. Telecommunication
3. LABOUR MARKET & HUMAN CAPITAL

3.1. Labour Market
3.2. Job Creation Index
4. PRODUCTION FUNCTION & INPUTS PRODUCTIVITY
5. FISCAL SECTOR
5.1. Budget
5.1.1. Budget Revenues
5.1.2. Budget Expenditures
5.1.3. Budget Balance
5.2. Fiscal Multiplier
5.3. Fiscal Efficiency: Towards Alleviating Poverty
6. MONETARY BALANCES
6.1. Domestic Liquidity
6.2. Deposits
6.3. Credit Facilities
6.4. Interest Rates
6.5. Exchange Rates
6.6. Inflation
3
7. EXTERNAL SECTOR
7.1 External Debt
7.2 Foreign Direct Investment (FDI)
7.3 Remittances
7.4 Net International Reserves (NIR)
8. NATIONAL STRUCTURAL REFORM PROGRAM
9. GREEN ECONOMY
CONCLUSION
Annex 1: Production Function Estimation

Annex 2: Fiscal Multiplier Methodology
4
1. Global Outlook
5
1.1 Global Growth

COVID-19 pandemic has affected the world and caused a dramatic loss of human life worldwide, making it the
worst crisis the world has seen in history. In addition to being a global health crisis, the COVID-19 pandemic
has caused an unprecedented shock to the global economy –shutting shops and schools, disrupting factories and
supply chains. The coronavirus (covid-19) pandemic is associated with negative macroeconomic, social and
epidemiological implications across the world, bringing severe impacts even for the largest and most
interconnected economies. The ineffectiveness of vaccines in response to virus mutations is also considered a
risk to the global economy.
Source: IMF
Source: IMF
6
1.2 Global PMI

Several countries showed some improvements after the outbreak of COVID-19, however, with the increase in
the number of cases of the Delta variant in the Eurozone and Russia in particular, many countries faced subdued
growth, and virus concerns, what affected the growth in other economies, most notably China.
IHS Markit's PMI business surveys showed a global economic recovery losing slight momentum in June.
Regional differences remained marked, however, underscoring the impact of COVID-19 vaccination progress
as rising virus waves continued to hit many countries, notably in Asia. Consequently, in the second quarter,
emerging markets underperformed compared to the developed world to a degree not previously recorded over
the survey's 23-year history.
The purchasing managers’ index (PMI) for the manufacturing sector dropped to 48.1 in June 2021 from 50.8 in
May 2021. IHS Markit's PMI surveys indicate that demand is switching from goods to services, but regional
divergences in consumer spending remained marked in June - resulting in steep variations in inflation trends.
Global PMI June'21
Source: Bloomberg
7
1.3 FAO Food Price Index (FFPI)
The FAO Food Price Index averaged

124.6 points in June 2021, down 2.5
percent from May, but still 33.9 percent
higher than its level in the same period
last year. The decline in June marked the
first drop in the Index following twelve
consecutive monthly increases.
Although the downturn in June 2021,
FFPI picked up again. The latest rise of
the FFPI was largely driven by higher
prices of most of the cereals and
vegetable oils. Dairy and sugar prices
were also firmer, while the meat price
sub-index remained stable. FAO Monthly Real Food Price Indix
The FAO Food Price Index tracks
changes in the international prices of the
most globally traded food commodities.
The drop in June reflected declines in the
prices of vegetable oils, cereals and,
though more moderately, dairy products,
which more than offset generally higher
meat and sugar quotations.
Dec-20
Apr-20
May-20
May-21
Nov-20
Apr-21
Jan-20
Mar-20
Jun-20
Oct-20
Aug-20
Jan-21
Mar-21
Jun-21
Feb-20
Jul-20
Sep-20
Feb-21
Source: FAO
8
1.4 Global Oil Price
Oil price jumped to reach an average of $73 a barrel on June

2021, which added an inflationary pressure. The recovery in
global oil demand from the coronavirus pandemic has been
quicker than expected, while global supply has been disrupted
by hurricane outages and low investment.
Average Oil Prices

73
69 68
64 66 65
62
55 55
52 50
43 45 44
42 42
Source: Nasdaq
9
1.5 Global Inflation

In some emerging economies, the recovery is also being held back by rising inflation, which forces the central
banks to tighten their monetary policy.
1. Energy
The global energy crisis is represented by a shortage of coal supplies and a historic rise in the prices of electricity, coal
and liquefied gas. Energy prices continue to rise in the third quarter of 2021, after reaching 73 USD/barrel in June 2021.
Natural gas and coal prices are expected to rise in 2022 as well as demand growth slows and supply constraints ease.
Crude oil prices are expected to reach an average of 74 USD per barrel in 2022, but it remains high, increasing global
inflationary pressures and potentially shifting economic growth to energy exporters rather than energy importers.
2. China Labor Costs Rise (China’s Demographic Crisis)

Due to birth rates decline and labor force shrink, Chinese labor and production costs increased—and created a
ripple effect for economies across the world. Without China's endless supply of workers leading to lower global
labor costs, other countries no longer have to lower their prices to compete. The global rise in manufacturing
costs has raised economists' concerns about inflation.
3. Global Supply Chains & Delivery Times

As more and more economies reopen thanks to increase vaccine distribution, consumers become ready to
spend—but goods and services are at a premium because of its scarcity due to the aforementioned supply chain
issues. Accordingly, delivery times are worsening in both the manufacturing and the service sectors, as per
PMIs.
4. Demand Recovery
Worldwide social distancing measures, starting in 2020, gave consumers fewer opportunities to spend money,
and lead people to save a larger amount of money. At the same time, governments introduced historic fiscal
stimulus packages that included tax breaks and direct payments. As a result, consumers have amassed large
reserves of savings: American consumers alone are sitting on $1.6 trillion in unspent cash. Increased demand
increases the costs of basic commodities, which in turn raises prices for consumers.
Source: IMF
10
1.6 Egypt Positioning on the Global and Regional Maps
Forbes 2021 Ranking- Middle East (In USD Bn)

1.6.1 Forbes
Saudi 701.5
Arabia 804.9
With USD 394.3 Bn gross domestic product (GDP) in
current prices, Egypt ranked the 3rd among the 5 largest 354.3
UAE
401.5
Arab economies in 2021, following Saudi Arabia which
ranked the 1st and UAE which ranked the 2nd. Egypt was Egypt
361.8
394.3
well prepared with 2016 economic reforms to face the
COVID-19 crisis. The government succeeded to balance Iraq
172
between targeted spending and financial sustainability 190.7
while rebuilding international reserves. Qatar

146.1
166
GDP in 2020 GDP in 2021

Source: GDP in Current Prices as per IMF’s estimation- Forbes (July 2021)
Economic Freedom Index Ranking (2021)
Rank Country Overall Score Change
UAE 76.9 0.7
Israel 73.8 -0.2 1.6.2 Economic Freedom Index
Qatar 72 -0.3 Egypt ranked 130 out of 178 countries in the

Economic Freedom Index 2021 with a score of 55.7,
Bahrain 69.9 3.6 compared to 142 in 2020. It has shown an
improvement in 9 out of the 12 categories of the
Saudi 66 3.6
5 index. Despite it is not from the first places
Arabia
Jordan 64.6 -1.4 regionally, however it’s the third year in a row,
6 where it shows improvements unlike other countries
Oman 64.6 1.0 which are deteriorated.
Kuwait 64.1 0.9
9 Morocco 63.3 0.0
Tunisia 56.6 0.8
Egypt 55.7 1.7
Lebanon 51.4 -0.3
Algeria 49.7 2.8
Iran 47.2 -2.0
Source: Economic Freedom Index

11
1.6.3 Global Innovation Index

Egypt jumped 2 places and ranked 94th out of 132 countries in the GII 2021, compared to 96th in 2020. It is ranked
the 13th out of 34 in the lower middle-income countries and the 7th in the region rank out of 19 countries.
Globally Lower-Middle Northern Africa

Income Countries and Western Asia
1.6.4 Global Competitiveness Index

Egypt ranked 82nd among 141 countries in the GCI in 2020. The country achieved a
remarkable progress from 2019, where it gained 11 places from 93 a year earlier. In
2017/2018, Egypt was considered the most improved country in the region. It ranked
the 100 over 137 countries after 115th in 2016/2017. 2014/2015 was considered a
turning point in Egypt, after the 2011 revolution and the instability in in the region,
Egypt started to recover in 2014. This was reflected on the different indicators of
development; after a deterioration of 12 positions between 2012 and 2015, a good
improvement was showed between 2015 and 2018 with a progress of 16 ranks. This
is thanks to the different reforms conducted by the different ministries in light of the
first phase of NSRF beginning in 2016.
1.6.5 Education
Egypt ranked 39th out of 78 countries in the US News ranking of the best countries
for education in 2021. The 2021 rankings are based on “a perception-based global
survey, which used a compilation of scores from three equally weighted country
attributes: having a well-developed public education system, whether people would
consider attending university there and if that country provides a top-quality
education.
1.6.6 Global Health Security Index
Egypt ranked 153rd out of 195 countries in the Global Health Security Index in 2021 and it positioned 33rd out of
54 countries in the African region. Despite COVID-19 outbreak, Egypt showed improvements in the scores in two
from the four pillars of the index: in Detect and Health with +0.6 and +2.3 respectively from 2019.
Globally Africa
12
2. ECONOMIC GROWTH
13
2.1 Real GDP FY 2020/21

GDP growth rates declined in the past two years, affected by the repercussions of Corona virus pandemic.
Despite mounting headwinds, the Egyptian economy is projected to keep expanding over the forecast horizon,
achieving a growth rate of 5.4%, 5.7% and 5.8% in 2021/22, 2022/23 and 2023/24 respectively.
Annual GDP Growth Rate Quarterly GDP Growth Rate

FY2020/21
5.6% 5.7% 5.8%
5.4%
7.7%
3.6% 3.3%
2.9%
2.0%
0.7%
2018/19 2019/20 2020/21 2021/22* 2022/23* 2023/24* Q1 2020/21 Q2 2020/21 Q3 2020/21 Q4 2020/21
Source: MPED Source: MPED
From the demand-side, although real GDP decelerated slightly to 3.3% during FY 2020/21, compared to 3.6% a
year earlier, Egypt’s real GDP growth rate is among the handful emerging economies. Household consumption is
in the front seats in terms of growth rate growing by 7.1% during FY 2020/21, compared to 7.3% a year earlier.
Both export and capital formation witnessed negative growth rate during the same year.
Developments in GDP at Market Price and its Components (%)

31.6
15.7 12.9
10.6 7.3 7.1
5.3 5.6 3.6 3.3 1.0 1.0 6.7 3.7
0.2 1.7 2.8
-2.2
-8.9 -7.5
-13.4
-17.9 -20.9 -21.7
GDP at Market Price Imports Household Government Capital Formation Exports
Consumption Consumption
2018/2017 2018/2019 2019/2020 2020-2021

Source: MPED
14
By analyzing the sources of real GDP growth during 2020/21, it has been observed that the main contributor for
GDP growth was the household consumption with a share of 5.9 % compared to the same rate in FY 2019/20.
Nonetheless, both exports and capital formation contributed negatively during FY 2020/21, registering about -
1.9% and -1.0%, respectively. Despite this negative contribution, both exports and capital formation revealed a
significant rebound from the previous year.
As imports contribution inched up in FY 2020/21, reaching 0.1 % against -4.8% during FY 2019/20. The
government consumption’s contribution showed an approximately similar share in both periods. From the above,
it can be concluded that the private consumption has the biggest share in this year growth. As such, the sources
of growth are inflationary as the share of private consumption remains relatively higher in comparison to the
shares of the gross capital formation and net exports. This doesn’t necessarily reflect an improvement in the
household’s purchasing power because GDP real growth rate is still below the historical levels.
Contributions to GDP Growth by Component (%)

GDP at Market Price Imports Household Consumption Government Consumption Capital Formation Exports
5.3 5.6 5.9 5.9

5.0
3.1 3.6 3.3
2.4 2.2
0.9 0.8 0.3 0.6 0.4
0.2 0.1
-0.4 -1.0
-1.9
-2.7
-3.8 -4.0
-4.8
2018/2017 2018/2019 2019/2020 2020-2021
Source: MPED
15
GDP per capita real growth rate declined in FY 2019/20 and 2020/21, reaching 1.2% down from 3.6% in
2019/18. This trend is resulted from the persistent increase of population, which emphasises the necessity of the
government to plan to control population growth rates, and maintain water and food security.
Evolution of Per Capita GDP

70,000 4.0%
60,000
3.6% 3.5%
3.0%
50,000
2.5%
40,000
2.0%
30,000 1.8%
58,289
62,682
54,255 1.5%
46,089
20,000 37,956 39,322 40,012 1.2%40,478
1.0%
0.8%
10,000 0.5%
- 0.0%
2017/18 2018/19 2019/20 2020/21
GDP per apita ( current prices) GDP per Capita (constant prices "2016/17=100")
GDP per Capita Real Growth rate
Source: MPED
Egypt BNI increased by 3 points in Q4 2020/21

recording 106 points up from 103 points last
quarter, marking a continued recovery for the Egypt BNI
economy.
Egypt was able to overcome the negative
repercussions resulting from the pandemic. This is 106
mainly due to the improvement of key economic
indicators such as: the stability of public financial 103
102
conditions, the presence of a large and reassuring 101
international reserves, in addition to the
government’s continued implementation of 98
financial, economic and structural reforms that
helped improving the operating environment for
businesses and ensured the sustainability of
economic indicators. Q4 2019/20 Q1 2020/21 Q2 2020/21 Q3 2020/21 Q4 2020/21
Source: MPED
16
2.2 Private Consumption
Private Consumption “Constant Prices” (LE bn)

3581
Private consumption has held up during the pandemic.
Egypt is the only country in the Middle East and North
3345
Africa that has increased its consumption rate during
Corona virus pandemic, according to Fitch, which is
considered a victory for the Egyptian economy and a 3088 3117
3058
testimony to the governmental policies during this
global crisis.
2017/2016 2018/2017 2018/2019 2019/2020 2020-2021

Source: MPED
Consumption BNI 113

112 112
The strong performance of the consumer sector in
Egypt can largely be contributed to the
implemented government policies to support
vulnerable businesses and individuals, in addition to
the flow of remittances from workers abroad. This
108 108 is coupled with low inflationary pressures and an
expansionary monetary policy that supports the
purchasing power of families.
Q4 2019/20Q1 2020/21Q2 2020/21Q3 2020/21Q4 2020/21

Source: MPED
17
2.3 Government Expenditures

Government expenditures showed a great support for
the Egyptian economy during the period of the
pandemic outbreak. The national projects contribute to Government Expenditures “Constant Prices” (LE
the sustainability of the targeted economic growth, so bn) 405
the Egyptian government doesn’t focus on a specific
economic sector, but it goes in parallel with all sectors, 391
such as transportation, agriculture, industry and
infrastructure. The goal of the national projects is that
each sector serves the other sector, in order to maintain 366
the targeted growth. 356
350
In order to deal with Corona virus, the government set
different policies, focusing on national and
infrastructure projects. This was resulted in an increase
in the employment rates, in addition to ensuring
employment in the public and private sectors. 2017/2016 2018/2017 2018/2019 2019/2020 2020-2021
Source: MPED
Government Expenditures BNI Government expenditures provided support for the

116
Egyptian economy during the pandemic outbreak,
114 being the fastest growing factor since Q4 2019/20 and
recorded 114 points during the peak of the global
slowdown worldwide. In the consecutive quarters, it
106
103 104 was shown less government expenditures, however it
is still the highest demand-side BNIs readings as it
reached 116 by Q4 2020/21.
Q4 Q1 Q2 Q3 Q4
2019/20 2020/21 2020/21 2020/21 2020/21
Source: MPED
18
2.4 Investment
Covid-19 repercussions have evidently hit Investment “Constant Prices” (LE bn)
investments in the last 2 years, as exhibited in chart
no. Since, it has registered a decline of about -20.9%
Covid-19 impact
in FY2019/20 Compared to the previous year. 693
Although, investments declined in FY2020/21, but It 613
530 548
has relatively recovered as the retreat rate accounted 506
for -8.5%. Thanks to the Egyptian government quick
actions facing the crisis to stimulate the economy
involving public investments injections along with
the stimulus package announced by the president of
EGP 100 bn.
2017/2016 2018/2017 2018/2019 2019/2020 2020-2021

Source: MPED
Investment BNI
89
84
76
58 One of the most affected components is investment

43 and it is still un-recovered yet, with net foreign
investment flows showing a remarkable increase in
Q4.
Q4 2019/20 Q1 2020/21 Q2 2020/21 Q3 2020/21 Q4 2020/21
Source: MPED
19
The total investments executed during FY 2020/21 amounted to EGP 760.5 billion. The private sector
contributed with 26.3% compared to 73.7% for the public sector. Accordingly, the transportation and storage
sector had the largest share of total investments reaching 15.6% followed by services sector of about 12.1%.
The figure below presents the public and private sector investment shares of total investment in the economic
activities. The private sector is leading during FY 2020/21, as demonstrated, the wholesale and retail came first
with a share of 95% followed by restaurants and hotels (93%). Natural gas occupied the third place, then
followed by real estate activities. Pointing out that the 3 leading NSRP sectors were at the fifth, sixth and seventh
places whereas private investments share in communications and information technology accounted for
approximately the half, while the manufacturing and agriculture private sector share registered 36% and 26%
respectively.
Public and Private Sector Investment Share of total Investments by
Economic Activity in FY 2020/21
Wholesale and Retail Trade 95
Restaurants and Hotels 93
Natural Gas 83
Real Estate Activities 77
Communications 50
Information Technology 49
Other Manufacturing Industries 36
Agriculture, Irrigation and Land… 26
Construction 15
Health Services 13
Education Services 11
Transportation and storage 11
Other Services 10
Crude Oil 8
Electricity 7
Financial intermediation,…
Suez Canal
Sewage
Water
Petroleum refining
Other extractions
Public Investments Private Investments

Source: MPED
The Share of Public and Private Sectors of Total Investments (%)
34.8 26.3
41.5 46.4 38.3
62.4 60.3 58.3 55.7 53.7
65.2 73.7
58.5 53.6 61.7
37.6 39.7 41.7 44.3 46.3
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

Source: MPED
`
21
This part analyzes the business environment in Egypt,

presenting the different indicators that show the performance
of the Egyptian economy.
First: Private Sector Share in GDP (at factor costs)
Private sector share of total GDP at factor costs have been
evolving over time, attaining 73.3 % in FY 2020/21 up from
72.6% a year earlier. This percentage is higher than the Chinese
one (60%), the Saudi Arabian (51%) and the Turkish (41.3%). Business
Private Sector Share in GDP
"current prices - factor cost"(%)
69.1 69.0 69.4 69.8 72.6 73.3
Environment
62.3 64.5 64.3 63.8 66.0
China
KSA
Turkey
indicators
Source: MPED
`
22
Second: Number of New Established Companies
The number of new companies has been fluctuating throughout the months post- COVID’19 crisis till April
2021, apart from the trough emerged in April 2020. This was resulted from the state of global and national
uncertainty and ambiguity. Most of new companies are classified among the services sector by
approximately 55.5%. 19.5% are associated to the industry sector, following by construction sector by about
14.1%. Therefore, Egyptian government focuses on enhancing business environment as one of the NSRP
Fundamentals, as well as supporting SMEs.
During April 2021, capital flows in Egypt are mostly conceived by Egyptians registering 65.2%, following by
foreigners accounted for 21.7% and lastly Arabs as indicated in the chart below.
22
Egypt’s PMI during FY 2020/21

Purchasing Managers Index (PMI) is a composite gauge designed to give a single-figure snapshot of operating
conditions in the non-oil private sector economy in Egypt.
During the beginning of FY 2020/21, PMI grew

beyond the level of 50 for 3 months in a row,
reflecting the recovery pattern of the non-oil sector
following the Covid-19 outbreak. However, PMI
“More
trend declined again in December 2020 along with
the surge of Covid-19 cases then started to pick up
again in April 2021 till June 2021 as the
vaccination process expanded.
Quoting!”
Egypt's PMI during FY 2020/21
51.4
50.9
50.4
49.9
49.6 49.4 49.3
48.7 48.6
48.2 48.0
47.7
Source: IHS
By analyzing the PMI sub-indices, it can be

observed that output, new orders and new export
orders followed relatively the same pattern.
Where their levels dropped by the end of 2020
then showed relative recovery during the
beginning of 2021 amid the start of the
vaccination process among countries. Whereas
output, international and domestic demand
showed recovering signs by the last quarter of FY
2020/21.
PMI sub-indices during FY 2020/21
56.3
55.3
54.0
53.6
53.4 52.7
53.0 52.4 52.4 53.1 52.7 53.2
51.7
51.4 51.9 52.0
50.9 51.2
50.5 51.0 50.2
49.7 49.1
48.9 48.6
48.6
48.0 47.9
46.9 46.9 47.0 47.7
46.7 46.8
Output/Activity New Export Orders New Orders
Source: IHS
23
2.5 Import & Exports
Exports of goods and services, as a component of the

demand side of GDP, revealed a gradual decreasing
pattern in the last 3 years, as illustrated below, decaying
by -13.4% compared to FY 2019/20. Alternatively,
imports of goods and services slightly rose in FY 2020/21
by 0.2%.
Exports and Imports of Goods and Services at Constant Prices (LE bn)
1017 1125 1025
722 841 843
706
549 553 479
2017/2016 2018/2017 2018/2019 2019/2020 2020-2021

Source: MPED
Exports of goods and services Imports of goods and services
The quarterly data of exports highlights the impact of Imports of goods and services grew remarkably during
COVID-19 global crisis on exports volume starting FY2020/21 up to 32.6% in Q42020/21 compared to -
Q42019/20. As shown below, it remained below the pre- 24.7% in Q4 2020/21.
crisis levels. The good news is that the steady growth rates
observed during FY2020/21, switched from negative to Imports of Goods & Services
positive side to record 53.7% in Q42020/21. (Quarterly data, in EGP bn)
400 Covid-19 Crisis 80%
Exports of Goods & Services 60%
300
(Quarterly data, in EGP bn) 40%
Covid-19 Crisis 200 20%
300 150% 0%
100
100% -20%
200 50% 0 -40%
100 0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-50%
0 -100% 2018/2017 2018/2019 2019/2020 2020-2021
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Imports of Goods & Services in EGP bn
2018/2017 2018/2019 2019/2020 2020-2021
Growth Rates of Imports (Y-o-Y)
Exports of Goods & Services in EGP bn
Growth Rates of Exports (Y-o-Y) Source: MPED
Source: MPED
24
Non-Petroleum exports CBE data revealed the recovery path of exports from COVID-19 repercussions. The figure
below showed the upward line of growth rates (Y-o-Y) reaching 49.4% in Q4 2020/21 and recording USD 8.1 bn
compared to 5.4 USD bn in the same quarter a year earlier, while it registered USD 20.1 bn during the whole FY
2020/21 versus USD 17.9 bn in FY 2019/20.
Non-Petroleum Exports ($bn)

9 60
8 50
7 40
6 30
20
5
10
4
0
3 -10
2 -20
1 -30
0 -40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
16/15 17/16 18/17 19/18 20/19 20/21
Merchandise exports in billions of dollars Growth rate of Egyptian merchandise exports

Source: CBE
Linear (Merchandise exports in billions of dollars)
Moreover, figure xx reveals the evolution of both oil and non-oil exports, along with imports. Petroleum exports
increased by 1.4% to reach USD 8.6 bn during FY 2020/21. Petroleum imports slightly retreated to USD 8.6 bn
after registering USD 8.9 bn in 2019/20. Whereas other imports surged by 15.2% to reach USD 62.1 bn in 2020/21.
This rise has totally offset the retreated petroleum imports as well as the increased petroleum and non- petroleum
exports.
Petroleum and Non-Petroleum Exports and Imports

62.1
53.9
20.1
17.9
8.5 8.6 8.9 8.6
Petroleum Exports Other Exports Petroleum Imports Other Imports

Source: CBE
2019/20 2020/21
25
Egypt’s Trade Volume Prospects

It is worth to mention that both petroleum and non-petroleum exports surged in June 2021 by 218.7% and 34.13%
respectively. Non-petroleum imports declined by 8% while petroleum imports soared reaching USD 817 million.
On a positive note, exports coverage rate to imports inched up in June 2021 compared to June 2020, recording
54.4% up from 39.6%.
Petroleum and Non-Petroleum Petroleum and Non-Petroleum

Imports in June 2021 compared to Exports in June 2021 compared to
June 2020 ($bn) June 2020 ($bn)
0.3 0.8 0.6
0.2
6.2 5.7 3.0
2.2
june-2020 june-2021 june-2020 june-2021
Non Petroleum Imports Petroleum Imports Non Petroleum Exports Petroleum Exports
Source: CBE Source: CBE
Referring to the sectoral distribution of merchandise exports and imports in June 2021, it can be observed that
food products share ranked first of total exports and imports, while garment exports came in second place,
followed by iron and steel.
Sectoral Distribution of Sectoral Distribution of

Merchandise Imports ($bn) Merchandise Exports ($bn)
0.45 0.22
Iron & Steel Iron & Steel
0.50 0.08
0.01 0.05
Glass Glass
0.01 0.03
0.22
0.05 Garments
Garments 0.14
0.05
0.09
Textiles
0.26 0.07
Textiles
0.19
0.03
Pharmaceutics
0.02
0.28
Pharmaceutics
0.23 0.05
Cement
0.02
0.82
Food products 0.54
1.33 Food products
0.47
Imports Jun-21 Imports Jun-20

Exports Jun-21 Exports Jun-20
Source: Customs Authority, GOIEC Source: Customs Authority, GOIEC
26
The distribution of exports and imports by degree of manufacturing and usage
As shown in below, that intermediate goods constitute As for exports, finished commodities share accounted
the largest proportion of imports during the period of for about 46% during the period of January/June 2021,
January 2021 till June 2021, followed by non-durable fuel came in the second place with a percentage of 23%
consumer commodities then investment commodities. and then semi-manufactured commodities attributed
by 20.1%.
Percentage Distribution of
Imports by Usage Degree Percentage Distribution of
Exports by Usage Degree
Jan/jun'21 Jan/Jun'20
Jan/jun'21 Jan/Jun'20
0.0%
Electric Power
0.0% 0.2
Electric Power
0.2
Non Durable Consumer 17.7%
Commodities 19.4%
45.9
Finished Commodities
9.5% 42.9
Durable Consumer
Commodities 8.6%
Semi-manufactured 20.1
13.4% Commodities 27
Investment Commodities
13.5%
10.1
34.9% Raw Materials
Intermediate Commodities
37.0% 12.6
13.5% 0.7
Raw Materials Raw Cotton
13.1% 0.5
11.0%
Fuel 23
8.4% Fuel
16.8
Source: CAPMAS Source: CAPMAS

27
The national supply and international demand for Egyptians exports in 2020
The following chart presents the intersection between international demand and Egyptian exports to the rest
of the world in 2020. It reflects the global market opportunities for Egypt, as it emphasizes the international
market gaps and the potential for Egypt to invest in the domestic production of goods that are highly demanded
internationally. Distinctly, electrical machinery and equipment as well as oil seeds are among the highest
internationally demanded products for which Egypt is net importer. In this context, Egyptian government is
working on achieving the structural reforms’ targets of optimizing the share of high and medium tech exports
of total manufacturing exports.
The National supply to the rest of the world (Egyptian exports) and international demand for
products exports by Egypt in 2020
Source : UN COMTRADE, ITC, 2020

28
2.6.1 Suez Canal

Despite Corona virus, Suez Canal’s revenues did not
decline during the past year. The Suez Canal
recorded annual revenues, the highest in its history,
at $5.84bn during the FY2020/21, with an increase of
2.2% over the FY2019/20, amounted to $5.72bn.
0.6% 5.9
2.2% bn USD
Sector’s growth rate in Total revenues in

Sector’s share of real
FY2020/21 compared to FY2020/21.
GDP during FY2020/21.
FY2019/20.
5 1.8%
bn EGP
Total implemented investments Suez canal’s revenues growth rate

to the sector in 2020/21. in FY2020/21 versus
Source: CBE, MPED, CAPMAS FY2019/2020.
29
Suez Canal Revenues (L.E bn)

8.7
8.3
7.8 7.8
7.4 7.4 7.7 7.7 7.6 7.4
7 6.9
6.5
The revenues of the Suez Canal, despite the
various challenges, have witnessed a major boom
recently, as navigation statistics during the
FY2020/21 recorded the highest annual revenue
in the history of the canal.
Nov-20
Dec-20
Apr-21
May-21
Jun-20
Oct-20
Jun-21
Aug-20
Jan-21
Mar-21
Jul-20
Sep-20
Feb-21
Source: Suez Canal Authority
Navigation statistics
during the FY2020/21
recorded a noticeable
increase in the number and
tonnage of ships transiting
the canal. Worth
mentioning, the total
passing ships during June
2021 reached 1656 ships
with ships’ cargo of 102.1
mn tons, increasing by
20% and 21% respectively
comparing to the total
Passing ships during June
2020, recording 1381 ships
Jun-21 Jun-20
with ships’ cargo of 84.2
mn tons. The credit goes to
the flexible marketing and
102.1
Ships Cargo(mn ton) pricing policies taken by
84.2 the authority to reduce the
negative impact of the
Corona virus crisis, as it
1263
No. of other Passing Ships succeeded in maintaining
982 the rates of vessel transit in
the canal and gaining the
confidence of customers.
393
No. of Passing Oil Tankers
399
Source: Suez Canal Authority

30
2.6.2 Tourism
Tourism sector remains one of the most affected
sectors by the global Covid-19 current crisis. The
sector decline rate reached -27% in FY 2020/21
compared to the previous year. Touristic revenues
dropped by approximately 51% registering 4.9 USD
bn down from 9.9 USD bn in FY 2019/20.
1.6% -26.7% 3.2%
Sector’s growth rate in Employment share in the

FY2020/21 compared to sector in 2020. of total
FY2019/20. employment.
6 -50.7%
bn EGP
Total implemented investments Tourism revenues growth rate in

to the sector in 2020/21. FY2020/21 versus FY2019/2020
Source: CBE, MPED, CAPMAS
31
The sector is dominated

by the private sector
investments, as illustrated
in the below chart,
whereas the share of
private sector reached
93.2% in FY 2020/21.
The Share of Public and Private Sector as % of Total

Implemented Investements in Tourism
53.3%
89.8% 84.7% 90.3% 84.8% 86.5% 93.2%

95.0% 94.0% 94.0%
46.7%
10.2% 15.3% 9.7% 15.2% 13.5% 6.8%

5.0% 6.0% 6.0%
2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
Public Investment Private Investment

Source: MPED, MAP Calculations
Since the pandemic hit, countries around the world started to lock down totally or partially, controlling transportation
and travel besides mandating precautionary measures. Tourism and transportation sectors, particularly airlines were
tremendously affected. Number of tourists decayed by 71.6% in 2020 compared to 2019. Likewise, tourism revenues
dropped by 68.4% in only one year.
Number of Tourists (mn) Tourism Revenue ($bn)

14.7
13.03
12.5
11.5 11.3 13
12.53
9.8 9.5 9.9 9.3 10.75
11.62
8.3 9.94
8.71
7.78
5.4 7.21
6.04 6.07
3.7
4.11
2.65
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: Ministry of Tourism, CAPMAS Source: Ministry of Tourism, CAPMAS
32
2.6.3 Agriculture
Agriculture is one of the main priority sectors in the
NSRP, it has the largest sectoral employment share
among other sectors.
11.5 20.3%
3.8%
%
FY2020/21 compared to sector in 2020 of total
FY2019/20. employment.
51.7 7.6%
bn EGP
Total implemented investments Agricultural exports share of total

to the sector in 2020/21 exports in FY 2020/21 (in
Source: CBE, MPED, CAPMAS percentage, end of period).
33
Agriculture was affected as well by COVID-19 repercussions, notably the disruptions of global and regional
supply chains that impeded agricultural exportation. This impact appeared during the months of FY 2020/21
despite the relative rise witnessed by the end of 2020 and the start of 2021. By April 2021, agricultural exports
traced a downward trajectory until June 2021.
Agricultural Exports Evolution (in USD thousands)
500000 14
13
12.3 12
400000 11.6 11.1
10.1 10
300000 9.1
7.6 8
6 6.6 6
200000
4.6 4.3 4.7 4
100000
2
0 0
Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21
Total agricultural exports (in USD thousands) Percentage of Agricultral Exports of Total Exports
Source: CAPMAS, Monthly Bulletin of Foreign Trade
Implemented investments in the agriculture sector used to be dominated by the private sector till 2016/17.
Simultaneously, with the reform program bold measures that Egypt applied in late 2016 and 2017, public
investments were directed to the agriculture sector aiming at stimulating productivity and agricultural exports up
to FY 2020/21 where COVID-19 spillovers affecting the global and national economy, public investments
recorded 74.3% of total investments.
The Share of Public and Private Sector as % of Total Implemented
Investements in Agriculture
33% 36% 29% 26%

50% 61%
65% 64% 69% 65%
67% 64% 71% 74%

50% 39%
35% 36% 31% 35%
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

34
2.6.4 Manufacturing
Although manufacturing sector was not among
the sectors hardest hit by the crisis, as per the recent
data, the sector retreated by 6.5% in FY 2020/21
compared to FY 2019/20.
10.8% -6.5% 13%
Sector’s growth rate in Employment share .in the

FY2020/21 compared to sector (% of total
FY2019/20. employment) in 2020
59.5 12.7%
bn EGP
Total Implemented investments Manufacturing Index Growth Rate

to the sector in 2020/21 in FY 2020/21 (end of period)
35
Noting that the manufacturing index was clearly recovered as indicated in the chart below by the beginning of 2021,
reached 18.9% in May 2021, but then decreased to 12.7% in June 2021. This decline derived from the trough in the
wood and cork industry (except furniture) that decreased by -47.17% in June 2021 compared to June 2020, as well
as the other transport equipment manufacture that reduced by -67.8%.
Manufacturing Index Growth Rate (Y-o-Yx
18.9
16.2
12.7
7.0
-9.5
-15.3 -17.1 -15.3
-19.5 -18.9 -18.3 -19.0
Source: CAPMAS, MPED

* Manufacturing index as part of the total production index
Concerning the public and private share of total implemented investments in manufacturing sector, the latter used
to have the highest share till FY 2016/17. As far as Egypt has taken bold measures regarding liberalizing the
exchange rate, inflation rate reached unprecedented levels, the government intervened to boost the sector
productivity in FY 2017/18, up to FY 2020/21 with a share of 64.2% as the government’s target is to implement
radical structural reforms in the sector.
The Share of Public and Private Sector As % of Total Implemented
Investements in Manufacturing
40% 36%
47% 48%
78% 79% 85%
87% 87% 94%
60% 64%
53% 52%
22% 21% 15%
13% 13% 6%
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

36
2.6.5 Telecommunication
Information and communication technology is the
highest growing sector in FY 2020/21, recording
16.1%. Since COVID-19 crisis, digitalization and
technology became the main feature of the world’s
post-crisis era.
3.2% 16.1% 0.8%

FY2020/21 compared to sector (% of total
FY2019/20. employment) in 2020.
30.5 125
bn EGP bn EGP
Total implemented investments GDP of ICT sector at constant

to the sector in 2020/21. prices in FY 2020/21.
37
Egypt pursued the digital transformation path even before the pandemic and it is among the main policies of the
structural reforms program (NSRP) adopted by the government and launched in April 2021.
The figure below presents the GDP of the sector at constant prices in the last 4 years, it can be observed that the
sector’s GDP growth across the years reached 16.1% in FY 2020/21 (EGP 125.12 bn).
GDP of the ICT Sector at Constant Prices
140.00 125.15 17.0
16.7 16.5
120.00 107.76
16.1 16.0
100.00 93.51
80.15 15.5
80.00 15.2
15.0
60.00 14.5
14.1 14.0
40.00
13.5
20.00 13.0
0.00 12.5
2017/18 2018/19 2019/20 2020/21
ICT Gross Domestic Product at constant prices (in EGP billion)

ICT sector growth rates
Source: MPED
The private sector share of total ICT investments became greater over the years. In FY 2020/21, public sector
accounted for 50.5% after that Egypt injected investments to this sector in the framework of NSRP and its
digitization plan.
The Share of Public and Private Sector As % of Total Implemented
Investements in ICT
120%
100%
80%
50%
60% 84%
97% 97% 96% 92% 89% 90%
98% 97%
40%
50%
20%
11% 10% 16%

3% 3% 2% 3% 4% 8%
0%
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018 2018/2019 2019/2020 2020/2021

38
ICT sector indicators in the first half of 2021:

According to the national telecom regulatory authority’s report, E-wallets rose to 16.3 million wallets registering
16% growth rate up from 14.1 million in the first half of 2020. Equally, electronic transactions surged by 175%
in 2021 compared to 2020.
E-Wallets (mn) Electronic Transactions

(mn)
16.3
81
14.1 29.5
First Half of 2020 First Half of 2021 First Half of 2020 First Half of 2021
Source: National Telecom Regulatory Authority (NTRA) Source: National Telecom Regulatory Authority (NTRA)
E-wallets distribution by companies in the Distribution of electronic transaction by

first half of 2021 services during the first half of 2021
Orange Cash Other

20% Withdrawal services…
13% Cash Transfers
Between
Etisalat Cash Wallets
11% Deposits 43%
17% recharging the
Vodaphone
balance
Cash
(mobile-
65%
internet)
20%
We pay
4%
Source: National Telecom Regulatory Authority (NTRA) Source: National Telecom Regulatory Authority (NTRA)
39
3. LABOUR MARKET & HUMAN CAPITAL

40
3.1 Labor Market
Employment is an important factor in the economic

development of any country, high employment rates indicate
active markets, which drive economic growth.
Unemployment rate follows downward trajectory in recent
years, starting from 2013 till 2020 reaching 8 %. Despite
COVID-19 global impact, unemployment in 2020 was
approximately the same as 2019 (before COVID-19). This is
due to the Egyptian government insistence to face this crisis
through a comprehensive package of coherent, well-
structured economic and social interventions that
strengthened the ability of Egyptian economy to face external
shocks.
Annual Unemployment Rates - Average Period (%)

13.3 13.2 12.8
12.7 12.6
12.0 11.8
10.6
9.4 9.9
9.0 8.7 9.0
7.9 8.0 7.4 7.3
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Q1 2021 Q2
Source: CAMPAS, Q2 2021
As for the participation rates, it remained

Participation Rate (%) at its downward slope accounted at 41.9%
46.4 in Q2 2021 compared to 42.2% in Q1 2020
45.8 45.4 45.4
44.9 and 38.9% in Q2 2020. This was resulted
44.3
43.5 43.2 43.1 42.7 43.5 from lower male & female participation
42.2 42.2 42.2 41.9
41.6 41.9 41.1 registering 67.7% vs 67.8% during the
previous quarter and 14.5% versus 15.1%
38.9
in Q1 2021 respectively. This dynamic
shows Covid-19 negative implications on
labour market from one side, and the
population increase from the other side.
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2016 2017 2018 2019 2020 2021
Source: CAMPAS
41
Labor Force
28.5 mn
Unemployed Employed
2.3 mn 26.2 mn
Female Male Female Male

37.5% 62.5% 15% 85%
Unemployment
Female rate 2020 Male
Unemployment Unemployment
rate 2020 7.9% rate 2020
17.7% 6%
Latest data of sectoral distribution of employed persons revealed
that agriculture sector had the largest proportion share of 19.2%
of total employed persons, constituting about 5.3 million
workers. Retail and wholesale sector ranked the second which
contributed by 15.3% of total employed, they accounted for
approximately 4.1 million workers. Construction and
manufacturing sector came afterwards, contributed by about
13.6% and 12.9%, respectively of total employed persons.
Whilst, economic activities that lost workers during Q2 2021
were construction sector reporting 88 thousand workers,
followed by agriculture (82 thousand workers), then education
losing 60 thousand workers. On the other hand, wholesale and
retail attracted 206 thousand workers in Q2 2021 followed by
water supply and drainage activity registering 65 thousand
workers.
42
The forecasts reveal that the unemployment rate will be on the downward trajectory over the upcoming three
fiscal years. This is fueled by a stronger economic growth during the same period that is estimated to be on
average 5.3%, 5.7% and 6.6% during the next couple of years. Such resilient economic activity is expected to
be associated with better performing unemployment rates that will be on average 6.6%, 5.4% and 4.2%.
43
3.2 Job Creation Index

3.2.1 Net-Hiring in Large Companies
Net hiring in large companies was remarkably affected by Covid-19 pandemic, as shown in the graph below.
However, in comparison with SMEs, the pandemic spillovers were greater on the latter. It is noted that large
companies’ recovery path followed a U shape, where the trough occurred in 2020 Q3, then, net hiring gradually
started to rebound since 2020 Q4. The good news is that in 2021 Q2, net hiring in large companies switched from
the negative into the positive territory registering 9 points.
Net Hiring- Large Companies
Source: ECES Business Barometer, Q2 2021, MAP Estimates
2- Net-Hiring in SMEs
COVID-19 pandemic effect on SMEs net hiring was more severe and persistent than its effect on large companies
as illustrated below. The effect was sharply appeared in Q2 2020, when SMEs net hiring reached -24, followed by
another decrease in Q4 2020, which reflected the vulnerability of SMEs to external shocks. Unlike large companies,
SMEs recovery path didn’t follow a specific shape. Up to Q2 2021, SMEs net hiring is still in negative territory
recording -6.
Net Hiring- SMEs
Source: ECES Business Barometer, Q2 2021, MAP Estimates

44
4. PRODUCTION FUNCTION &

INPUTS PRODUCTIVITY
45
PRODUCTION FUNCTION & INPUTS PRODUCTIVITY

Empirical evidence indicates that during recent years, productivity of labor is on the upward trajectory.
Meanwhile, productivity of capital shows stagnant pattern, implying that the productivity of technology is
fixed over time. However, total factor productivity (TFP) shows some rebound to the pre-pandemic levels.
This raises the question of how skilled are the labor that are employed during recent years, as productivity
of capital depends essentially on the quality of labor. This can be explained by the fact that number of
employed persons has increased dramatically since 2016, and productivity is increasing substantially
during recent years, implying that quality of labor is also improving, and this is reflected on both the quality
and the quantity of the production.
Quarterly Growth Rate in the Induced Inputs Productivity
(Y-o-Y)
(in percent)
5.00
4.00
3.00
2.00
1.00
0.00
-1.00
-2.00
-3.00
-4.00
Labor Poly. (Labor)

(Y-o-Y)
(in percent)
3.31
3.31
3.31
3.31
3.31
3.31
3.31
3.31
Capital
46
One interesting observation is that starting from Q3 2016/17, TFP has inched up to unprecedented levels, wherein
growth rate of TFP registered a 15-year peak of 4.3% during Q3 2018/19. Knowing that TFP is the portion of growth
that is neither generated from labor nor capital, therefore, it is a product of better technology, coherent policies, and
human capital. Since after, TFP has plunged to the negative territory during the global pandemic, afterwards it
started to show a clear rebound during March-June 2021, although it is still hovering in the negative territory.
(Y-o-Y)
(in percent)
4.00
2.00
0.00
-2.00
-4.00
-6.00
-8.00
TFP Poly. (TFP)
These recent development in TFP growth rate are the results of less misallocation of resources in the economy and
better government institutions as part of the recent reform program adopted starting November 2016, in the
framework of the 3-year Extended Fund Facility by the IMF, along with the National Structural Reform Program
(NSRP).
47
5. Fiscal Sector
48
5.1 Public Revenues

The growth rate of public revenues reached 13.66% in 2021 compared to 2020, which achieved a growth rate of
3.56%, due to the increase in private consumption from 84% in 2020, to 87% in 2021 post COVID-19. The increase
in private consumption, the development of mechanization of tax collection and the expansion of the tax base
increased the efficiency of tax administration which contributed to the growth of tax revenues. The figure below
indicates the growth rate of revenue during 2020-2021, showing the steady rise observed in 2016/2017, due to the
increase in indirect taxes, especially the implementation of the value added tax law in October 2016.
The growth rate of Public Revenues

34.12%
24.57%
14.71% 13.66%
5.64%
1.85% 3.56%
0
2015/2014 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020
Source: MoF
The main engine of revenue growth is tax revenues, especially VAT, which is one of the most important indirect
taxes on which the general budget depends, which is taxes on public and private consumption, meaning that
everyone bears the same tax rate of 14% when buying. Private consumption is one of the most important demand-
side drivers of gross domestic product (GDP), which represents more than 80% of Egypt's gross domestic product
(GDP) during comparison years. Indirect taxes may affect consumption reduction, thereby reducing the supply side
of GDP and thus reducing direct taxes on commercial and industrial profits
The Evolution of the Structure of the General Budget Revenues (mn)

271,678
203,181 230,534 2,955
188,639 2,609 5,263
3,194
179,494
3,543
133,847 135,630 833,993
3,543 736,121 739,633
25,437 629,302
462,007
305,957 352,315
2015/2014 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020
Source: MoF Taxes Revenues Grants Other Revenues

49
5.2 Public Expenditures

The total public expenditures in 2020/2021 amounted to EGP 1,58 billion, with a growth rate of 10.04%. It is
shown that there is an increase in the growth rate of expenditures by 4.73% compared to the previous year. This
is due to the increase in spending on subsidies and social benefits compared to 2019/2020. It is noted that it did
not grow during these years, however investment spending increased by 30%, other expenses by 15%, and the
purchase of goods and services rose by 17% as show in the figure below.
The growth rate of public expenditures

26.18%
20.59%
11.52%
10.08% 10.04%
4.54% 4.73%
2015/2014 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020
Source: MoF
The Evolution of the Structure of Public Expenditures (mn)
2015/2014 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020

Purchase of non-financial assets
61,750 69,250 109,141 109,680 143,342 191,642 249,372
(investments)
Other expenses 50,279 54,551 61,517 74,758 77,565 86,802 99,751
Support, grants and social benefits 198,569 201,024 276,719 329,379 287,461 229,214 263,886
Benefits 193,008 243,635 316,602 437,448 533,045 568,421 565,497
Procurement of goods and services 31,276 35,662 42,450 53,088 62,365 69,871 81,462
Wages and employee compensation 198,468 213,721 225,513 240,054 266,091 288,773 318,806
Source: MoF
50
5.3 Budget Balance

5.3.1 Primary Balance
The budget achieved a primary surplus for the fourth year in a row. It shows a decrease in the primary balance of
the previous year, due to the growth rate increase of public expenditures with a higher rate than the previous year.
The surplus of the first budget confirms the government's ability to cover its main expenses without resorting to
borrowing, this is due to the spending rationalization approach in reducing public expenditures, as well as
controlling the tax system.
The Evolution of the Primary Balance 105,085 109,127

95,349
14,175
2015/2014 2016/2015 2017/2016 2018/2017 2019/2018 2020/2019 2021/2020
-56,155
-75,101 -82,720
Source: MoF
5.3.2 Cash Balance

The budget deficit for FY 2020/2021 amounted to EGP 470,149 million, with a growth rate of 2.36%. It may be
noted that the deficit growth rate decreased from the previous year, which amounted to 7.32%, as the government
pursued different policies to rationalize public spending. decreased by -0.5%, in addition to an increase in public
revenues by correcting the general tax system, and increasing private consumption, which is the main financier of
the tax system, especially indirect tax. This confirms the response of the Egyptian economy to the fiscal policies
that have been adopted in terms of maximizing and diversifying public revenues. and rationalization of public
expenditures.
Cash Balance (mn) The Rate of Change in the Cash Deficit

C
-470,149 2021/2020 21.73%
-459,294 2020/2019
14.22% 13.55%
-427,960 2019/2018
-423,274 2018/2017 9.55%

7.32%
-372,757 2017/2016
2.36%
-326,356 2016/2015 1.11%
-268,109 2015/2014
Source: MoF Source: MoF

51
It is noted that the increase in the indirect tax receipts during the comparative years, has led to higher rates of
growth in public revenues. It is recommended to accelerate the development of legislative amendments to the
system of indirect taxes, especially Value Added Tax, as it is related to consumption, where the increase in private
consumption, which represents more than 80% of the demand side of the domestic product, increases the supply
side of the domestic product, which leads to an increase in the profits of commercial and industrial companies.
It is also important to consolidate local manufacturing competitiveness and support the local product promotion
initiative through the establishment of a risk Support Fund. This will lead to a GDP growth rate increase and rise
in the real income of individuals by reducing the fixed cost of the final product. This will lower the price of the
final product, leading to a competitive presence of the local product and providing new job opportunities.
5.3.3 Fiscal Multiplier
Generally, fiscal multiplier is defined as the ratio of a change in output (ΔY) to a discretionary change in
government spending (ΔG). The fiscal multiplier basically measures the short-run effect.
In order understand the time horizon of the fiscal multiplier in Egypt, empirical evidence indicates that the short-
run impact multiplier, (which is usually defined as the multiplier in the first quarter following the change in
spending) is very low. However, the impact of 1% shock in government spending materializes in the medium- to
long-terms and increases gradually over time to register about 0.30 after 5 years. Moreover, the long-run multiplier
reaches its full impact of 0.47 after 10 years of the policy change.
Another VAR model specification has been implemented because the impact of the public spending on GDP was
diluted by including more macro-variables. Thus, a Bi-variate VAR was estimated, and the following has been
concluded:
- The short-run impact multiplier, which is usually defined as the multiplier in the first quarter following the
change in spending in very low.
- However, the impact of a 1% shock in government spending materializes in the medium- to long-terms and
increases gradually over time to register 0.50 after 5 years.
- Moreover, the long-run multiplier reaches its full impact of 0.82 after 10 years of the policy change.
The second VAR model gives more reasonable result, because according to the multiple regression, it has been
estimated that the long-run impact of public spending on GDP is 0.91, which has been underestimated by the first
VAR model.
However, the long run impact of the second VAR (after 40 quarters or equivalently after 10 years), is estimated to
be 0.82, which is close to 0.91 estimated coefficient.
Accumulated Response of GDP to
Accumulated Response of GDP to Government Shock (in%) – VAR2
Government Shock 0.47
(in percent) - VAR1 0.43
0.38
0.33
0.28
0.22
0.16
0.09
0.02
1 5 10 15 20 25 30 35 40
Source: MPED Source: MPED
Quarters
52
Growth Rate in Real GDP, Potential GDP and

the Induced Output Gap (y-o-y)
Hodrick-Prescott Filter (lambda=1600)
(in percent)
8
6
4
2
0
-2
4
-4
2
0
-2
-4
-6
-8
2004 2006 2008 2010 2012 2014 2016 2018 2020
GDP_FC Trend Cy c le
According to the literature, the impact of government spending on real GDP is highly sensitive to the phase of the
economic cycle; the multiplier is relatively larger during an economic downturn and the recession period as the
economy witnessed a negative output gap.
It is crucial to highlight that the time scope used to study this empirical relationship has witnessed serious economic
shocks and policy fluctuations such as the economic downturn resulted from the spillovers of COVID-19, that has
put the economic growth on the downward trajectory especially during 2020 and the adoption of the reform program
supported by the IMF in 2016 till 2018 accompanied by important economic decisions such as the exchange rate
liberalization.
During these economic recessions and prudent measures, the government’s role is to intervene economically to boost
growth, through stimulus packages and higher government expenditures, to increase GDP, which is reflected in
higher magnitude of fiscal multiplier, especially in the long-run. Therefore, this coefficient estimated at a range of
0.82 - 0.91 reflecting the government’s impact on GDP during economic recessions.
5.3.4 Fiscal Efficiency: Towards Alleviation Poverty

Below a detailed analysis for the efficiency of the public spending on sectors will be conducted, also it will
conclude with different scenario and simulations for the policy options to come up with the best policy mix that
can help in alleviating poverty in Egypt.
The objective of the analysis is to provide evidence-based answers to the effective policies that the government can
use to target poverty in Egypt. The analysis entails the effectiveness of government spending on health, education,
and construction. In addition, scenario-based examination will be applied.
Public Spending Efficiency

In assessing impact of government spending, an interesting question arises concerning the efficiency of that spending
in addition to the volume of spending. i.e., assessing the performance of the public spending.
Education and health expenditures are the programs that in principle contribute the most to improve the allocation
of resources and tackle the issue of the provision of goods and services, which aim at correcting some market failures.
Furthermore, spending in education, whether public or partly privately funded, is usually considered as more growth
enhancing than some other expenditure items. For instance, public investment in education should increase the level
of human capital and this can be seen as one of the main sources of long-run economic growth.
53
Methodology
▪ In analyzing the impact of the public spending on the outcome, it is resorted to the idea of input- output.
Some data points didn’t exist, an interpolation method was applied to have a continuous dataset. The time
spans from 2002/2003 through 2019/2020. The analysis was implemented twice: once using the public
expenditure and once utilizing the public investment spending.
▪ The impact on public investment on education is measured on the primary school enrollment, secondary
school enrollment and tertiary school enrollment. In doing so, an education index was calculated
including the three indicators obtained from the World Development Indicators (WDIs).
▪ Similarly, for health, the impact of the public investment on health is measured on four indicators: life
expectancy at birth, infant mortality rate, under-5 mortality rate and mortality caused from cancer and
diabetes for ages between 30-70.
▪ Moreover, investments in construction impact are measured in terms of the mortality caused by road
traffic injury
Main Findings:
▪ The expenditure on health and education, presents human capital formation which can make skilled labor force.
This skilled labor force can enhance the productivity of physical and human capital and in return it would have
positive impact on economic growth, via better Total Factor Productivity (TFP).
▪ Health expenditure is an important determinant of the health status and economic development of a nation.
Experience has revealed that countries which assign due recognition to this aspect have healthier and more
productive human capital.
▪ Due to discrepancies in data between the public expenditure and the public investments, it has been suggested to
apply the analysis twice to get more insights about the real effect of the expenditure/investment (input) on the
developments indicators (output).
▪ Empirical evidence revealed that public investment on education and health are still too modest and don’t exceed
0.4% and 0.3% to GDP, respectively. Moreover, the public expenditure on education and health registered 3.2%
and 1.5%. The government should proceed in its economic support for these key sectors to improve the human
capital and ensure a sustainable growth soon.
▪ Public spending on health is relatively shallow, nonetheless, with a coefficient that is typically both numerically
large and statistically significant at conventional levels. Estimated coefficients revealed that it pays off especially
in improving the infant and under-5 mortality years for each EGP 1 million spending on health.
▪ Moreover, it has a positive but relatively marginal impact on education with an estimated coefficient ranging
between 0.06 and 0.13 basis points improvement in the education index for each EGP 1 million spending on
education.
▪ The effect of the public spending on health has a modest impact on the chronic diseases like cancer and diabetes,
a conclusion suggests that a lot need to be done in this field to improve the health conditions of the Egyptians.
54
6. Monetary Sector
55
6.1 Domestic Liquidity
Domestic liquidity at the end of FY2020/21 has remarkably increased compared to the corresponding period
FY2019/20 by approximately 18.0%. Similarly, money supply and quasi-money inched up by approximately 16%
and 18.8%, respectively.
Compoments of Domestic Liquidity M2
(in mn EGP)
Jun. Jun. Jun. Jun. Jun. Jun. Jun. Jun.

2014 2015 2016 2017 2018 2019 2020 2021
Domestic liquidity M2 Money Supply M1 Quasi Money

Source: CBE
6.2 Deposits
In FY 2020/21, the total deposits increased by around 23.8% compared to the same period a year earlier. This rise
was driven by the increase in public and private sector deposits as well as households by approximately 8%, 16%
and 24% respectively between the end of FY 2020/21 and FY 2019/20.
Evolution in Total Deposits (in EGP mn)
Jun. Jun. Jun. Jun. Jun. Jun. Jun. Jun.

2014 2015 2016 2017 2018 2019 2020 2021
Time and Saving Deposits Public business sector * Private business sector Household sector
Source: CBE
56
6.3 Credit Facilities

In FY 2020/21, credit facilities went up in June 2021 compared to June 2020 and June 2019. Governmental institutions
credit facilities surged by 101.5% in June 2021 versus June 2020. Family sector came in the second place, growing
by about 26%, followed by the private sector registering approximately 25% and non-governmental institutions
recorded 22.4%. The highest proportion of credit facilities at the end of June 2021 was focused on the manufacturing
sector (43.5%), following by services (35.2%) and trade (18%).
Credit facilities to different sectors (bn EGP)
Jun-19 Jun-20 Jun-21
1553.4
1268.8
1038.2
881.1 819.6
706.9
574.077 549.5
337.5 436.3 235.84
406.7
1.312 1.3 1.3
Non-governmental private sector family sector external world sector governmental institutions
institutions
Source: CBE
SECTORAL SHARE OF CREDIT FACILITIES END OF JUNE 2021
Agriculture , 3.5
Services , 35.2
Industry , 43.5
Trade , 17.9
Source: CBE
57
6.4 Interest Rates

Interest rates remained unchanged as presented below. This was reflected in the monetary policy committee’s
decisions in the last six consecutive meetings, where they fixed the interest rates at the same levels without any
modifications, in the framework of an accommodative policy. Deposit rate was at 8.25%, whereas lending rate was
set at 9.25% and the discount rate was at 8.75%.
Key Policy Rates (End of Period) (in %)
Source: CBE
6.5 Exchange Rates

The Exchange rate is still witnessing a relative stability over the last year period. Moreover, EGP witnessed an
accumulated nominal appreciation of 1.9% over FY 2020/21. This might limit the inflationary pressures, in which
the pass-through effect would be favorable on inflation during the upcoming couple of months, conditional on the
direction of exchange rate movements up or down.
EXCHANGE RATE DEVELOPMENTS (USD /EGP) DURING FY 2020/21
15.9
15.9
15.7
15.7 15.6 15.7 15.7 15.6
15.6 15.6 15.6 15.6
Source: CBE
58
6.6 Inflation
Recent Developments: Headline and Core Inflation
Urban headline inflation rate fell to 5.1% in June 2021 down from 5.6% in June 2020, recording a decline of about
0.5 percentage points. This came on the back of anchored inflation expectations and less volatile exchange rate
market. Meanwhile, core inflation rate inched up to 3.7% in June 2021 compared to 0.9% a year earlier. This was
due to the hike in the international food and oil prices that started to appear in response to the supply-chain disruptions
because of COVID-19 pandemic.
EVOLUTION OF CORE INFLATION (%)
4.0%
3.9% 3.8% 3.8%
3.6% 3.6% 3.7%
3.3% 3.4%
3.3%
0.8%
0.7%
Source: CBE
EVOLUTION OF HEADLINE INFLATION(%)
5.7%
5.4%
4.8% 4.9%
4.5% 4.5% 4.5%
4.2% 4.3%
4.1%
3.7%
3.4%
Source: CBE
59
Inflation forecasts
According to the baseline scenario, urban headline inflation will be maintained during FY2021/22 at a single
digit, backed by favorable base effect from the previous year albeit it inched up to register 6.04% during Q3
2021. This is attributed to:
▪ higher inflationary pressures due to the second-round effects of the fuel prices hikes
▪ higher international food prices that are partially transmitted to the domestic economy
▪ along with the positive money gaps induced from the domestic liquidity estimates.
▪ In addition, the inflationary contribution of the private consumption to real GDP growth rate during Q3
of FY 2020/21.
▪ Moreover, the exchange rate started to show minor depreciation since the beginning of September,
suggesting unfavorable pass-through effect.
For headline inflation, forecasted figures are on average ranging between 6.1% and 8.6% for FY2021/22.
Moreover, headline inflation is expected to inch up during Q2 FY 2021/22 to range between 5.4% and 8.4%
because of the increase in fuel prices first and second round effects, in addition to higher international food
prices. Since then, headline will be tamed out to hover around 6%-7%, within the target set by the CBE which
is 7% (+/-2%) to be met by Q4 2022.
It is worth to note that the forecasts for Q1 of FY2021/22 for core inflation came in line with the actual figures,
in which a core inflation is projected to be 4.4% while the actual figure materialized at 4.6%. As for headline
inflation, the forecasts came on the upper side wherein it is forecasted 8.6% for Q3 2021, while it registered
actually 6.0%, supported by the above-mentioned reasons.
However, the medium-term picture will be diversified if the international hikes of food and oil prices are
taken into consideration. Headline inflation is expected to reach a double digit of 14.9% by December 2021 that
would persist between 11.0% to 13.0% by December 2022.
Headline Inflation Forecasts Fan Chart Core Inflation Forecasts Fan Chart
(at 50% Confidence Level) (at 50% Confidence Level)
13.8 8.9
12.2 7.5
4.6
4.5 4.1 3.7
6.0 6.9 3.5
7.0 6.2 3.9
3.4
5.9 3.3
5.4 5.2 6.1 2.4
4.6 4.78 2.2
4.56 1.7 1.6
3.8
Jun-19
Jun-20
Jun-21
Jun-22
Dec-19
Dec-20
Dec-21
Mar-19
Sep-19
Mar-20
Sep-20
Mar-21
Sep-21
Mar-22
Jun-19
Jun-20
Jun-21
Jun-22
Dec-20
Dec-19
Dec-21
Mar-19
Sep-19
Mar-20
Sep-20
Mar-21
Sep-21
Mar-22
Source: MPED
Source: MPED
60
61
7.1 External Debt
The Evolution of the External Debt

134.8 137.9
125.3 129.2
123.5
108.7
92.6
79.0
55.8
43.2 46.1 48.1
33.7 34.9 34.4
33.6 37.0 36.0 33.9 33.7 33.8 34.5 34.2
15.9 15.2 13.5 16.4 15.1 14.4 16.6
2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 20/21 20/21 20/21 20/21
Q1 Q2 Q3 Q4
External Debt ($ bn) External Debt/GDP (%) Safe Side (Medium) Safe Side (High)
Source: CBE
The external debt increased by the end of FY2020/21 to reach $137.86 bn, with an increase of 11.6% compared to
FY2019/20, during which external debt recorded $123.5 bn. Notably, Corona pandemic negatively affected the
performance of all economic sectors, leading to widening the funding gap and an increase in borrowing
applications made exceptionally to support the budget.
The ratio of external debt/GDP increased to reach 34.2% in June 2021 compared to 33.9% in June 2020 but still
within the safe limits (less than 40%), but it is necessary to be more conservative with the external borrowing, while
taking into consideration the new debt have to be long-term.
The figure below indicates the External Debt Structure according to the Due
improvement and stability of the external Date
debt structure according to the original
maturity in June 2021 compared to June Long-term Debt Short-term Debt
2020. The reliance on medium and long-
term external debt increased according to
the original repayment deadlines, 2020/21 90.1% 9.9%
reaching 90.1% of total external debt in
June 2021, and 89.8% in June 2020. This
reflects the government's reliance on
2019/20 89.8% 10.2%
medium- and long-term borrowing and
increased repayment periods to improve
the external debt structure, which in turn
Source: CBE
eases the pressure on the foreign Short-term External Debt / Net International
exchange resources to pay over longer Reserves (%)
39.2
periods. The ratio of short-term debt 33.8
according to the original repayment term 27.8 28.5
24.9
was 9. 9% in June 2021 compared
to10.2% in June 2020.
Jan-17 Jan-18 Jan-19 Jan-20 Jan-21

Source: CBE
62
Zooming in the structure of external debt

according to funding sources by the end of the
FY2020/2021, the figure below shows the
increase in the value of loans provided by
international institutions to reach $51.56bn in
June 2021, as the ratio of total loans from
international institutions to total external debt
reached 37.4% In June 2021. It is worth noting
that loans provided by international institutions
retain the largest share of the external debt, as
these institutions offer loans at low interest
rates, grace periods and long-term repayment
periods.
Source: CBE
Bonds come in second place as the bond balance increased to $28.71bn in June 2021. While the relative weight of
bonds relative to the total external debt decreased to represent 20.82% by June 2021.
Deposits of Arab countries (Saudi Arabia, the United Arab Emirates, and Kuwait) come in third place according to
external borrowing financing sources, reaching $21.93 bn in June 2021, representing 15.9% of the total external
debt.
External Debt Structure by Debtor ($bn)
15.5
14.3 14.4
13.9 11.9
25.6
12.4 9.5
27.9
9.7 6.0
4.1 28.0
26.6
30.3
82.4
69.4
57.3
47.6
34.9
Source: CBE Government Central Bank Banks Other Sectors
Looking at the figure above, notably, the debt structure stability according to the beneficiaries through FY2020/21
compared to FY2019/20, where the government continued to be the largest beneficiary by 60%, with about $82.4
bn. The Central Bank comes in second place with a 19% of the external debt, signaling a decrease compared to the
previous fiscal year, as it received $25.6 bn. While the banking sector came in third place with a 10% of the external
debt, signaling an increase from the previous fiscal year to record $14.4 bn.
63
The figure below reflects the

improvement of the debt structure at the
end of June 2021 according to the interest
rates applied to the external debt portfolio,
Average Interest Rate compared to the end of June 2021, where
the data indicates that the largest share of
Fixed Interest Floating Interest the portfolio is 62% of the external debt,
on which a fixed interest rate is applied in
3.92% 3.77% order to hedge against Interest rates
3.09%
fluctuations, which are expected to
increase during the up-coming period in
light of the expectations of the Federal
1.65% Reserve to raise interest rates, while a
variable interest rate is applied to 38% of
the external debt portfolio. Notably, the
fixed interest rate witnessed a slight
decrease in June 2021 to reach 3.77% on
2019/20 2020/21 average compared to 3.92% in June 2020,
Source: CBE
while the variable interest rate witnessed
a significant decrease until it reached
1.65% on average in June 2021 compared
to 3.09% In June 2020.
External Debt per capita

Debt service ($bn)
17.2
15.8
13.3 13.5
13.2 11.7
11.1 10.2
7.3
6.1
3.3 4.0 4.2
1.2 2.2
Interest (paid) # Principal (repaid) Total Debt Service (during the period)
Source: CBE
$ 1272.9
June 2021
64
7.2 Foreign Direct Investment (FDI)

Net foreign direct investments declined since
Net Foreign Direct Investment ($bn) the pandemic breakout reaching $7.5bn by
FY2019/20 followed by a 31% Y-o-Y decline
Inflows Outflows Net Foreign Direct Investment reaching $5.2bn. As the Corona pandemic led
to a decline in the volume of foreign direct
16.4 15.8 investment globally and this severely affected
13.4 13.2 13.9
the capital and investments of major
international companies, the repercussions of
7.9 7.7 8.2 7.5
the Corona pandemic also included the
5.2 suspension of travel and the closure of
airports, as well as a number of companies
transferring a greater percentage of their
2016/17 2017/18 2018/19 2019/20 2020/21
profits abroad, as out-flows increased by 3.6%
-5.4 -5.4 to reach $8.7 bn during the fiscal year 2020/21.
Source: CBE -8.2 -8.4 -8.7 In-Flows also decreased by 12% to reach
$13.9 bn.
Net FDI breakdown ($bn) The decline in the value of net foreign direct investment inflows
during the fiscal year 2020/21 was a result of the sharp decline in net
7.5
foreign investments in the petroleum sector, which amounted to
5.2 negative $1.2 bn, with a decrease of 200% compared to the
FY2019/20. However, the net foreign investments in the non-oil
6.3 6.4 sectors increased to reach $6.4 bn, with an increase of 1.6% compared
1.2
to the FY2019/20.
European union signaled the largest FDI inflows to Egypt followed
2019/20 -1.2
2020/21 by the Arab countries. FDI inflows from USA witnessed a 14%
increase reaching $1.6 bn, while decreased by 20.5% from Arab
Net FDI in Petrolum sector countries reaching $3.1 bn in the FY 2020/21.
Net FDI in Non-petrolum sector
Net FDI
Source: CBE
FDI inflows breakdown ($bn)

USA UK EU Arab Countries Other Countries
1.7 1.6
1.0 1.0 3.1 2.3
3.9
1.8 1.9
3.1
8.7 8.0 10.2 9.0 5.1
1.8
1.8 2.2 1.4 1.4 1.6
2016/17 2017/18 2018/19 2019/20 2020/21
Source: CBE
65
FDI Sectoral Breakdown ($bn)

2020/21 2019/20
0.5
construction
0.9
FY 2020/21 witnessed an increase in
the FDI inflows to services &
manufacturing sectors by 4.3% &
1.0 21% respectively, while the FDI
others
1.1 inflows declined at the petroleum &
construction sectors by 30% & 44%
respectively.
2.3
Manufacturing Although the decline in the petroleum
1.9 sector, yet it still acquires the largest
portion of the FDI inflows followed
by the services, manufacturing &
4.9 construction sectors.
Services
4.7
5.1
Petroleum
7.3
Source: CBE
Services Breakdown ($bn) FY2020/21
Tourism,
0.1
Real
estate, 0.6
As services sector witnessed the second largest FDI Financial,
inflows through the FY2020/21, it is noticed that the ICT, 0.7 1.9
financial sector acquired the largest inflows portion by
signaling $1.9 bn while Tourism signaled the smallest
portion by only $0.1 bn.
others, 1.6
Source: CBE
66
7.3 Remittances
Remittances ($bn)
2015/16 2016/17 2017/18 2018/19 2019/20 2020/21
31.4
26.4 27.8
25.2
.1 21.8
Source: CBE
Remittances from Egyptians abroad recorded the highest record during the FY2020/21, increased by
more than 13% to reach $31.4 bn, compared to $27.8 bn in the FY2019/20. Inflows have held up
well during the pandemic, remittances have ignored COVID-19 lockdowns and global oil prices have
soared.
While analyzing the reasons behind the remittances increase during the pandemic year, we find out:
Remittances of Egyptian
workers were not affected
by the pandemic except An 11% increase followed
during the fourth quarter in the following month and
of the FY2019/20, when remittances returned to
almost all countries of the strong performance in the
world implemented total following quarters.
and partial closure
procedures, so remittances
decreased by about 10%
on an annual basis, to
reach then $6.2 bn.
67
Possible reasons for remittances increase
The remittances of Egyptians rose despite the contraction of most of the

world’s economies. This may be explained by the possibility of Egyptian
workers and professionals returning to Egypt with their savings after
losing their jobs abroad, or returning to Egypt and working remotely for
those who are able to do so.
The stability of the Egyptian currency during the pandemic, the

improvement of economic conditions and the adoption of light closure
measures may have contributed to the return of a number of Egyptians and
their money from abroad to settle again in Egypt.
It is possible that the 15% interest savings certificates presented by the

National bank of Egypt and Banque Misr in March 2020 contributed to
the influx of more savings into the country. As the two banks collected
about EGP 383 bn in proceeds from the certificates before they were
suspended in September 2020.
The recent increase in the rate of inflation, which made workers abroad
increase the value of their remittances as a kind of support for their
families.
68
7.4 Net International Reserves (NIR)
Egypt's net international reserves reached $40.6 bn by the end of June 2021, compared to $38.2 bn by the end of
June 2020. Egypt's net international reserves have increased since June 2020, by about $2.4 bn, after it witnessed a
decline from a historical level recorded at $45.5 bn in February 2020, due to the repercussions of the global crisis
of the Corona virus pandemic.
The current NIR covers about 6.9 months of Egyptian imported goods, which is higher than the global average of
about 3 months. Egypt's net international reserves is a key indicator that expresses the power of the economy, and
the extent to which the country is able to cover its obligations, the external debt, and to meet different payments for
imports.
Since March 2020, foreign reserves have witnessed a remarkable decline for three consecutive months, in light of
the negative effects of the outbreak of the Coronavirus pandemic, and then NIR rose again for the thirteenth month
in a row, but still below the pre-Corona levels until now.
Despite the continuing crisis, as Egypt's obtained a quick loan from the International Monetary Fund worth $ 2.8
billion and the agreement on another $ 5 billion loan to be disbursed in installments helped support foreign exchange
reserves.
Net International Reserves

Net International Reserves ($bn) NIR in months of merchandise imports
44.3 44.5
40.6
38.2
31.3
17.5
8.4 8 7.3 6.9

6.4
3.7
Jun-16 Jun-17 Jun-18 Jun-19 Jun-20 Jun-21

Source: CBE
Net International Reserves breakdown June’21
While analyzing the net

international reserves by the end on
FY2020/21 we found out that the
foreign currencies acquire the
largest portion with 89.4% while
Gold in the second place acquiring
10.1% and finally SDR by 0.5%.
Source: CBE
69
8. National Structural
Reform Program
70
NSRP AS THE SECOND PHASE OF ECONOMIC REFORM PROGRAM
Building on the success of the implemented economic reform program, the Egyptian government announced
its Commitment to pursue this track of reforms by launching a 3-year National Structural Reform program
(NSRP), which is considered a second phase of the economic and social reform program that started in
November 2016.
The second phase of the program involves conducting structural reforms targeting the real sector through
implementing a comprehensive package of radical and well-targeted reforms at both structural and legal
levels and targeting the root causes of imbalances in the real sector and business environment in order to
encourage inclusive growth, create new job opportunities, diversify and develop production patterns,
improve the business climate, localize manufacturing, and enhance the competitiveness of Egypt’s
exports aiming at achieving sustainable and inclusive economic development.
The Main Pillar:

Expanding the Relative Weight of the Following 3 Leading Sectors in the Egyptian Economy:
Information and
Manufacturing Agriculture Communication
Technology (ICT)
The Main Pillar: Expanding the Relative Weight of the Following 3 Leading Sectors in the Egyptian Economy:
These leading sectors have been selected according to specific criteria:
▪ High Potential of Growth
▪ Relative Weight in the GDP
▪ Employability
▪ Sectoral Linkages
▪ International Competitiveness Advantage
▪ High Potential of Value-Added Generation
The 5 Supportive Pillars are:
Upgrading the Bolstering Human

Improving labor
governance and Capital Development
Market efficiency
the efficiency of (Education, Health, and
and the TVET public Social Protection)
System institutions
Promoting business Promoting financial
environment and inclusion and
enhancing the role of facilitating access to
private sector finance
71
NSRP AND EGYPT’S VISION 2030
The NSRP comes in line with Egypt's Vision 2030 and the UN Sustainable Development Goals (SDGs),
supporting their goals and dimensions: economic, social, and environmental. In addition, the NSRP takes into
account further aspects related to the green economy and environmental protection, the fourth industrial
revolution, the pillars of Egyptian family development strategy, the necessity of controlling population growth
rates, and maintaining water and food security.
NSRP POLICIES AND FRAMEWORK
The targeted structural reforms include a set of policies that positively impact the aggregate supply side
to lay the groundwork for a long-term transformation toward an inclusive, resilient, and green economy
and covers more than one type of reform, such as:
Reducing Poverty and

Enabling the Private Sector Strengthening Social Safety Promoting Exports
Nets
Equality of localizing the

needed reforms among
governorates in accordance
Leveraging Digitalization Reforming SOEs
with a Matrix of
governorates / ministries
and related entities.
Achieving Climate Resilience

Economic Diversification Trade Liberalization
and Green Recovery
Capital Market
Vocational Training Labour Market
Enhancement
Educational Sector
In order to ensure successful and fruitful implementation, the NSRP has been developed according to an
executive framework characterized by the following features:
▪ Dynamism
▪ Comprehensiveness
▪ Supportive Institutional Framework
▪ Evidence-Based
▪ Executive with Measurable KPIs
72
NSRP MAIN REFORMATIVE SYSTEMS
The
Government
Legislative
Performance
System
System
The
Demograp The reforming
hic System five main systems
and The
Population Logistical
Characteri System
stics
The
Financing
System
NSRP QUANTITATIVE TARGETS

In terms of the NSRP’s quantitative targets, the actual real GDP growth rate in FY 2020/2021 is 3.3% and the
expected target for FY 2023/2024 is 6-7% with sustainable and positive growth rates during COVID-19. The
investment share to GDP in FY 2020/2021 is 12.3% and is expected to reach a minimum of 20% in FY
2023/2024. The private sector’s share of total investments is also expected to grow by 20% per year in FY
2023/2024. The inflation rate in FY 2020/2021 is 4.5% and is targeted to reach 7% in FY 2023/2024, this
rate will be achieved after reaching the appropriate level that stimulates the market and achieves a general
balance.
The total GDP contribution of the three productive sectors was 25.4% in FY 2020/21 while the targeted GDP
contribution of the three sectors in FY 2023/24 is targeted to range between 30-35.
73
The Executive NSRP Action Plan:
• The NSRP Supreme Committee headed by the Prime Minister and the membership of all ministers, which
was formed by the PM decision.
• Established a high-level technical committee, which is responsible to monitor the program implementation
and coordinating between different authorities in charge of implementing the needed reforms, supervising
the implementation and the evaluation process as a whole, besides submitting periodic reports to the NSRP
Supreme Committee headed by the Prime Minister and the membership of all ministers.
• This is in addition to the formation of five working groups including members from all relevant ministries,
MPs, the private sector, ERADA initiative and independent experts covering the following fields:
➢ Enhancing the Business Environment and the Role of Private Sector along with the
Manufacturing and ICT Sectors
➢ Financial Inclusion
➢ Labor Market and TVET
➢ Governance and the Administrative and Institutional Reform
➢ Agriculture Sector
The Governance of the NSRP focuses on:

The monitoring and evaluation methodology, which relies on:
• The data collection from all involved entities comprising the dynamic use of a set of quantitative key
performance indicators
• Analyzing data and drawing conclusions
• Disseminated periodic reports on its progress
The NSRP Progress Report

The technical committee is currently collecting data from all ministries and preparing the first follow-up quarterly
report prior to be presented to the NSRP Supreme Committee.
74
IX. Green Economy

75
From the perspective of Egypt’s atmospheric composition and climate variability, it is

noticed that the average monthly temperature and rainfall in Egypt during the period
(1991-2020) keeps being at moderate levels. This shows the resilience of Egypt’s climate
that strengthens its adaptive capacity towards climate change.
On the quantitative front, the estimated loss in GDP growth rate is estimated to be -0.58%
by 2050, compared to a loss of -0.61% by 2050 as estimated by the IMF as presented in
Kahn et al (2019). MAP in-house estimations are so close in magnitude to those presented
by the IMF especially during 2050.
On another note, a disaggregated analysis for crops covering the expected impact of
climate change on the agriculture sector in Egypt has been implemented. Three behavioral
models are estimated for wheat, corn and rice, and revealed that both wheat and rice will
be affected adversely by the climate changes registering a loss of 8.5% and 8.6% by 2030,
respectively and a loss of 9.7% and 11.7% by 2050, respectively. Nonetheless, corn
appears to be affected positively.
76
Given the impact on the yields of the main crops, it can be grasped that there will be a negative effect on the supply
of crops by 2050. This might put some inflationary pressures on the agriculture products and can push inflation rate
upwards.
It has been noted that policy space of central banks would be affected by an increasing likelihood of extreme weather
events, and it is expected that the increased likelihood would widen the uncertainty bands surrounding the long-term
inflation outlook. This could put upside risks on inflation and this situation needs the attention of the Central Bank
to such dynamics in the sense that CB should include the climate change among its medium-term inflation outlook
toolkit.
As such, it is observed that not only inflation is on the upward trajectory but also its uncertainty bands are
widening between the climate change scenario and the no-climate change scenario. In case of climate change
scenario, it ranges between 7.7% - 8.4% between 2021-2050, while it ranges between 8.1% - 8.3% with the no-
climate change scenario. Rising temperature and rainfall appeared empirically to have limited and marginal
negative net effect on agriculture.
productivity in Egypt. Moreover, it is not expected that it will be extremely sensitive to the climate changes soon as
estimated through year 2030. As per the World Bank Climate Change Knowledge Portal, the Egyptian crops yields
would not be affected severely by year 2050. These crops future yield compared to the baseline yield (1961-1990)
include best cereal (- 0.67%), maize (-0.41%), rice (0.81%), sorghum (0.72%), except wheat that will be adversely
affected by -16.3%.
On the national level, Egypt has taken pre-emptive and proactive steps to support the achievement of the Sustainable
Development Goals (SDGs) and to promote its adaptive capacity to climate change. As such, Egypt submitted its
Nationally Determined Contribution (NDC) and Third National Communication (NC3) to the UNFCCC in 2016
which come in line with Egypt’s Sustainable Development Strategy and Egypt’s Vision 2030; providing the
guidance and policy goals for sustainable economic development and responsible environmental management to
meet climate change adaptation strategies and development priorities.
77
CONCLUSION
Covid-19 ongoing crisis has transformed the global economic landscape in many aspects since its spread in the
whole world as of early 2020. In this context, the report aims at tracing the economic developments in Egypt during
FY 2020/21 and elaborating on the real sector, fiscal sector, monetary sector, and external sector. In addition, it
sheds the light on how the bold steps that Egyptian government has taken facing the pandemic have helped in
mitigating its negative repercussions on Egyptian Economy compared to peers. Yet, the report considers also the
upcoming reformative measures which Egypt adopts within the framework of the National Structural Reform
Program (NSRP).
As for the real sector, the real GDP growth rate decelerated slightly to 3.3% during FY 2020/21, compared to
3.6% a year earlier. It’s worth to note that Egypt’s real GDP growth rate is among the handful emerging economies.
The main contributor for GDP growth was the household consumption with a share of 5.9 %, while, both exports
and capital formation contributed negatively during FY 2020/21, registering about -1.9% and -1.0%, respectively.
Despite this negative contribution, both exports and capital formation revealed a significant rebound from the
previous year. GDP per capita real growth rate declined in FY 2019/20 and 2020/21, reaching 1.2% down from
3.6% in 2019/18. Egypt BNI increased by 3 points in Q4 2020/21 recording 106 points up from 103 points last
quarter, marking a continued recovery for the economy. The business environment indicators during FY 20/21
showed that private sector share of total GDP at factor costs have been evolving over time, attaining 73.3 % in FY
2020/21 up from 72.6% a year earlier. Egypt’s PMI during the beginning of FY 2020/21, grew beyond the level of
50 for 3 months in a row, reflecting the recovery pattern of the non-oil sector following the Covid-19 outbreak.
Regarding the labour market and human capital during the FY 20/21, data indicated that unemployment rate
followed downward trajectory in recent years, starting from 2013 till 2020 reaching 8 %. Despite COVID-19 global
impact, unemployment in 2020 was approximately the same as 2019 (before COVID-19). This is due to the
Egyptian government insistence to face this crisis through a comprehensive package of coherent, well-structured
economic and social interventions that strengthened the ability of Egyptian economy to face external shocks.
The empirical evidence for production function and inputs productivity indicates that during recent years,
productivity of labor was on the upward trajectory. Meanwhile, productivity of capital shows stagnant pattern,
implying that the productivity of technology is fixed over time. However, total factor productivity (TFP) shows
some rebound to the pre-pandemic levels.
In fiscal sector, the growth rate of public revenues reached 13.66% in 2021 compared to 2020, which achieved a
growth rate of 3.56%. The total public expenditures in 2020/2021 amounted to EGP 1,578,774 million, with a
growth rate of 10.04%. This is due to the increase in spending on support and social benefits compared to
2019/2020. Whilst fiscal multiplier analysis revealed that the impact of 1% shock in government spending
materializes in the medium- to long-terms and increases gradually over time to register about 0.30 after 5 years.
Moreover, the long-run multiplier reaches its full impact of 0.47 after 10 years of the policy change.
As to the monetary balances, that latest figures demonstrated that domestic liquidity at the end of
FY2020/21 has remarkably increased compared to the corresponding period FY2019/20 by approximately
18.0%. The total deposits increased by around 23.8% in FY 20/21 compared to the same period a year earlier.
Credit facilities went up in June 2021 compared to June 2020 and June 2019. Governmental institutions credit
facilities surged by 101.5% in June 2021 versus June 2020.
78
Family sector came in the second place, growing by about 26%, followed by the private sector registering
approximately 25% and non-governmental institutions recorded 22.4%. Urban headline inflation rate fell to 5.1%
in June 2021 down from 5.6% in June 2020, recording a decline of about 0.5 percentage points. Meanwhile, core
inflation rate inched up to 3.7% in June 2021 compared to 0.9% a year earlier. For headline inflation, forecasted
figures are on average ranging between 6.1% and 8.6% for FY2021/22. Moreover, headline inflation is expected
to inch up during Q2 FY 2021/22 to range between 5.4% and 8.4%
Concerning external sector data, external debt increased by the end of FY2020/21 to reach $137.86 bn, with an
increase of 11.6% compared to FY2019/20, during which external debt recorded $123.5 bn. The ratio of external
debt/GDP increased to reach 34.2% in June 2021 compared to 33.9% in June 2020 but still within the safe limits
(less than 40%),
NSRP launched in late April 2021 is the Egyptian government plan to pursue a serious economic structural
reforms targeting the real sector through implementing a comprehensive package of radical and well-targeted
reforms at both structural and legal levels and targeting the root causes of imbalances in the real sector and business
environment in order to encourage inclusive growth, create new job opportunities, diversify and develop
production patterns, improve the business climate, localize manufacturing, and enhance the competitiveness of
Egypt’s exports aiming at achieving sustainable and inclusive economic development.
Green economy is among the strategic priorities of the government as it is the one of the human well-being
enablers and sustainability drivers. Hence, Egypt is moving forward to increase green investments. In
addition, the government submitted its Nationally Determined Contribution (NDC) and Third National
Communication (NC3) to the UNFCCC in 2016 which come in line with Egypt’s Sustainable Development
Strategy and Egypt’s Vision 2030; providing the guidance and policy goals for sustainable economic
development and responsible environmental management to meet climate change adaptation strategies and
development priorities. By testing the potential impact of climate change on the agriculture sector in Egypt, three
behavioral models are estimated for wheat, corn and rice, and revealed that both wheat and rice will be affected
adversely by the climate changes registering a loss of 8.5% and 8.6% by 2030, respectively and a loss of 9.7% and
11.7% by 2050, respectively. Nonetheless, corn appears to be affected positively.
Finally, as presented throughout the report, during 2020/2021, Egypt succeeds in accomplishing many
achievements despite the current situation of COVID-19 outbreak thanks to its bold measures and reforms
in light of the NSRF. It proved its existence between many other countries on the global and regional maps. It
ranked the 3rd among the 5 largest Arab economies in 2021. Egypt ranked 130 out of 178 countries in the
Economic Freedom Index 2021 with a score of 55.7, compared to 142 in 2020.
79
ANNEX 1: PRODUCTION FUNCTION ESTIMATION

• Cobb-Douglas function with constant returns to scale is assumed while estimation.
• Output is proxied by GDP at constant prices, number of employed for labor and capital stock based on the
perpetual inventory method is utilized.
• The estimation period spans from 3Q 2002/03 through 2Q 2020/21.
• Total Factor Productivity (TFP) is derived as a Solow residual:
𝑦𝑡
𝐴𝑡 = ,
𝐿∝ 1−∝
𝑡 𝐾𝑡
Where: A is TFP, L is Labor, K is capital, α is elasticity of output to labor and 1-α is elasticity of output to
capital, such that α+(1-α) = 1.
• Based on a restricted model, α = 0.62 and 1-α = 0.38, as such capital appears to be the main contributor to
growth during the period under investigation.
ANNEX 2: FISCAL MULTIPLIER METHODOLOGY

• In analyzing the impact of the fiscal policy on the economic activity, researchers resort to fiscal multiplier as
a good measure for the effect of the additional government spending on the levels of income in a particular
economy.
• To estimate fiscal multiplier, it is not a bi-variate relationship. Rather, the relationship entails some economic
interrelations by addressing a set of macroeconomic variables that can portrait the Egyptian economy.
• The utilized model includes the real GDP as the variable of interest being a function in real government
consumption, real exchange rate, treasury bill rate and the degree of economic openness. The data used in
estimation covers the period of 2001Q3 till 2020Q4.
• The methodology adopted a multiple regression to come up with the long-run estimated coefficients,
afterwards Structural Vector Auto-regression (SVAR) and impulse response functions are applied to get more
insights about the time horizon of the multiplier effect of a fiscal shock on the real output.

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The Annual

3. LABOUR MARKET & HUMAN CAPITAL

4. PRODUCTION FUNCTION & INPUTS PRODUCTIVITY

Annex 1: Production Function Estimation

1.1 Global Growth

1.2 Global PMI

Global PMI June'21

1.3 FAO Food Price Index (FFPI)

The FAO Food Price Index averaged

1.4 Global Oil Price

Oil price jumped to reach an average of $73 a barrel on June

Average Oil Prices

1.5 Global Inflation

2. China Labor Costs Rise (China’s Demographic Crisis)

3. Global Supply Chains & Delivery Times

1.6 Egypt Positioning on the Global and Regional Maps

Forbes 2021 Ranking- Middle East (In USD Bn)

while rebuilding international reserves. Qatar

GDP in 2020 GDP in 2021

Economic Freedom Index Ranking (2021)

Rank Country Overall Score Change

UAE 76.9 0.7

Israel 73.8 -0.2 1.6.2 Economic Freedom Index

Qatar 72 -0.3 Egypt ranked 130 out of 178 countries in the

Kuwait 64.1 0.9

9 Morocco 63.3 0.0

Tunisia 56.6 0.8

Egypt 55.7 1.7

Lebanon 51.4 -0.3

Algeria 49.7 2.8

Iran 47.2 -2.0

Source: Economic Freedom Index

1.6.3 Global Innovation Index

Globally Lower-Middle Northern Africa

1.6.4 Global Competitiveness Index

2.1 Real GDP FY 2020/21

Annual GDP Growth Rate Quarterly GDP Growth Rate

Developments in GDP at Market Price and its Components (%)

2018/2017 2018/2019 2019/2020 2020-2021

Contributions to GDP Growth by Component (%)

5.3 5.6 5.9 5.9

Evolution of Per Capita GDP

Egypt BNI increased by 3 points in Q4 2020/21

2.2 Private Consumption

Private Consumption “Constant Prices” (LE bn)

2017/2016 2018/2017 2018/2019 2019/2020 2020-2021

Consumption BNI 113

Q4 2019/20Q1 2020/21Q2 2020/21Q3 2020/21Q4 2020/21

2.3 Government Expenditures

Government Expenditures BNI Government expenditures provided support for the

2017/2016 2018/2017 2018/2019 2019/2020 2020-2021

58 One of the most affected components is investment

Q4 2019/20 Q1 2020/21 Q2 2020/21 Q3 2020/21 Q4 2020/21

Public Investments Private Investments

The Share of Public and Private Sectors of Total Investments (%)

Public Investments Private Investments

This part analyzes the business environment in Egypt,

Egypt’s PMI during FY 2020/21

During the beginning of FY 2020/21, PMI grew

By analyzing the PMI sub-indices, it can be

Output/Activity New Export Orders New Orders

Exports of goods and services, as a component of the

2017/2016 2018/2017 2018/2019 2019/2020 2020-2021