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Egypt is weathering the global economic downturn better than much of the developing world, thanks to a decade’s worth of forward looking liberalization policies and a savvy fiscal stimulus package. In 2009 – when many countries are likely to record minimal growth – Egypt’s GDP grew by more than 4 percent.
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Egypt continues to receive significant levels of foreign direct investment (FDI). Its FDI reached nearly $20 billion in 2008, a 40 percent increase over the previous year.
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Millions of jobs have been created in Egypt since 2004 as a result of its economic liberalization policies. Egypt’s unemployment rate fell from 11 percent in 2005 to 9 percent in 2009.
Egypt named as one of World’s Top Ten Reformers
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In April 2009, Egypt was named among the world’s Top Ten Reformers in the IFC/World Bank’s “Doing Business” report for the fourth year in a row.
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Egypt was noted for its reforms in the business start-up arena, which included streamlining the construction permit and property registration processes, protecting investors and accessing credit.
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The international rank of Egypt as an FDI recipient improved from 126 in 2003 to 20 in 2008.
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The government is focusing on reducing the number of Egyptians living in poverty. Its aggressive goal is to decrease the number of citizens that fall at or below the poverty line by 50 percent within the next 6 years; from its current 19 percent to 8 percent by 2015.
Proactive Response to the Financial Crisis
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The Egyptian government’s stimulus package involves injecting 120-140 billion Egyptian pounds into the economy through 52 new projects.
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For the fiscal year ending in June 2009, GDP is expected to yield 4-4.5 percent growth. While lower than the previous year (7%), this year’s numbers are sufficient to meet the 4% target identified by the Egyptian government as the rate of development needed to achieve its goals. In order to reduce unemployment levels, the Egyptian government is striving to generate 650,000 new jobs per year.
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The decline in prices of building materials will positively affect infrastructure projects which are included in the Government's stimulus package. These projects will ultimately benefit the underprivileged, providing them with new roads, clean water supplies and sewage systems.
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Areas that continue to thrive despite the financial downturn include: agriculture, real estate, construction and tourism.
Going in the Right Direction
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The expected 2009 FDI is $7.5 - $8 billion USD. The average FDI since 2004 is $10 billion. Thus, despite the global financial crisis, Egypt successfully limited the impact on FDI to a drop of approximately 25 percent. Two years ago, Egypt was the first country in the Middle East to reduce minimum capital requirements for foreign investment. Other countries in the region joined in and followed suit.
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Oil continues to be a strong base to the Egyptian economy despite recent drops in the price per barrel. Due to the strength of past earnings, it is projected that overall oil proceeds until 2020 will be almost equal to the proceeds received during the past 15 years.
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Egypt’s Consumer Price Index (CPI) inflation fell 10 percentage points from the fall of 2008 to the early part of 2009, from 14.3 percent to 13.5 percent.
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Egypt is an attractive investment for other countries and, based on the depth of its domestic economy, has enormous growth potential. In addition, it is close in proximity to key markets such as Europe, the Mediterranean, Africa and the Gulf states.