Growth has held up better in Egypt than in neighbouring countries until recently but inflation has reached very high levels and financing conditions have tightened along with foreign currency shortages. In this context, Egypt is stepping up economic reform efforts. The exchange rate needs to become more flexible with monetary policy geared to bring inflation down to target. High public debt makes Egypt more vulnerable to external shocks. Committing to a credible consolidation strategy is key to restore public finance health, which would improve investor confidence and thereby reduce debt servicing costs. While expanding cash transfers to the most vulnerable, broad-based energy subsidies should be phased out, which would also reduce emissions. As public investment has expanded substantially, further efforts to rationalise large-scale construction projects should be pursued, while allocating resources to green investment. To revive private sector growth, the regulatory burden and the state footprint ought to be reduced, and ongoing reforms including the divestment plan should be implemented fully and effectively. As the working-age population will expand with a rising education level, younger generations need to be better integrated into the labour market. This requires reducing labour taxation, enhancing public employment support and better aligning skills to labour market needs.

SPECIAL FEATURES: IMPROVING THE BUSINESS CLIMATE TO REVIVE PRIVATE SECTOR GROWTH; PROMOTING BETTER-QUALITY JOB CREATION FOR INCLUSIVE GROWTH