This Survey is published under the responsibility of the Economic and Development Review Committee of the OECD, as part of the OECD Egypt Country Programme. It is the first OECD Economic Survey of Egypt.

Growth has held up better in Egypt until recently than in neighbouring countries in the face of a series of major exogenous shocks, and reform efforts have been stepped up in several areas. However, growth slowed in 2022, as inflation surged and massive capital outflows occurred, which led to foreign currency shortages and devaluations of the Egyptian pound.

Over the past few years, Egypt has embarked on economic reforms to promote strong, inclusive and sustainable growth (Box 1.1) and to resume faster convergence with the more advanced economies, following a lull in the early 2010s (Box 1.2). Egypt Vision 2030 sets national objectives in line with the United Nations Sustainable Development Goals. A series of programmes have been spelled out to help achieve these objectives, including the Economic Reform Programme (2016-19) and the National Structural Reform Programme (2021-24), with a view to enhance the productive capacity of the economy and to boost competitiveness and employment opportunities. The National Structural Reform Programme is comprehensive, covering a number of priority policy areas, in particular, reducing the state footprint, facilitating private sector activity, promoting a green and circular economy, reforming the labour market and expanding social protection.

Growth has held up better in Egypt until recently than in neighbouring countries in the face of several major external shocks, and the government has started to implement structural reforms to address macroeconomic imbalances and improve longer-term growth prospects. Following the ongoing slowdown, growth is projected to pick up, provided inflation subsides, financing conditions normalise, and uncertainty dissipates, which requires prudent monetary policy and steadfast commitment to fiscal consolidation. Stepping up reform efforts would help improve investor confidence, alleviate external pressures and keep debt service costs in check. It would also bolster the economy’s resilience against future shocks. Egypt is particularly exposed to the consequences of climate change, highlighting the importance of green policies. Energy subsidies should be reduced and social benefits target the most vulnerable people. Public investment should focus on green infrastructure that promotes private sector investment.

Weak productivity in Egypt is rooted in deep-seated structural causes that impede market competition and prevent a more efficient resource allocation. This implies a number of challenges for economic policy to meet the objectives for long-term sustainable growth as set out in the National Structural Reform Programme, but the government is determined to tackle the issues, and is committed to increase the role of the private sector. Market mechanisms such as business entry and exit, and growth of the most efficient firms, appear to be weaker than in many similar emerging markets. Recent reforms have started to tackle heavy regulatory burdens and barriers that hinder market entry and encourage informality and should be pursued, while the judiciary system still requires improvement. Competition from abroad, and the attraction of foreign direct investment are hampered by tariff and non-tariff barriers, implying that Egypt does not fully benefit from global value-chains and spillovers of technology and knowledge that would help lift productivity. The way state-owned companies are operating across a large number of sectors prevents private businesses from competing on a level playing field, although the government has recently started to take steps to level the playing field for all firms. Moreover, many businesses still face difficulties in accessing finance, as banks overwhelmingly prefer to lend to the government. Enhancing access to finance and improving digitalisation would contribute to a more competitive environment, lifting business sector growth.

Egypt’s working age population is set to expand substantially, with a rising education level, making for growth opportunities. However, employment ratios have trended down, while informality has become increasingly prevalent, particularly penalising the youth. Such trends should be reversed by creating more and better-quality jobs, thereby better integrating people into the labour market, in particular the youth. Easing rigid market regulations would boost productivity and promote formal job creation. High labour costs should be reduced, which would also bring a larger share of the working age population into formal employment. At the same time, social protection and worker support should be expanded to address labour market insecurity and obstacles to labour force participation. Education is also key to foster productivity growth and formal jobs. Ongoing reforms, notably the National Structural Reform Programme, aim at developing skills, promoting female labour force participation and expanding social benefit programmes. These important initiatives should be complemented by additional policy measures to ensure sufficient job creation and improve job quality, thereby durably raising living standards for all and improving employment prospects especially for younger generations.