On the fifth anniversary of the Egyptian revolution, economic reform is at the top of the government’s agenda to position the country on the road to recovery to achieve high and rapid growth that can be shared by all Egyptians. To that end, this blog summarizes the findings of two recent studies published by the Economic Research Forum (ERF) and authored by Hosny, Kandil and Mohtadi (2013) “The Egyptian Economy Post-Revolution: Sectoral Diagnosis of Potential Strengths and Binding Constraints” and Hosny (2015) “Are We Sure About the Effects of the Egyptian Uprisings? A SURE Approach”. These were two of the first comprehensive research studies to try to learn and diagnose what has and has not worked before and after this historic event in order to move the Egyptian economy forward and unlock the country’s economic potential. Specifically, using data on output and investments before and after January 25th for twenty different economic sectors, they show that sectors with the highest growth rates prior to the revolution are the ones that have been most adversely affected afterwards. Among other sectors, this is the case for the agricultural sector.
The studies show that output in the agricultural sector has been affected by a number of factors. Specifically, Hosny, Kandil and Mohtadi (2013) cite “deterioration in investors’ confidence and lingering uncertainty that have adversely domestic spending and shrunk the sources of external resources” as the main reasons for this performance. The difficulty to access enough banking loans and low competiveness in international export markets were also cited as additional reasons. Related to this, Hosny (2015) shows that private sector investments have been more hardly hit in the years following the revolution, compared to investments by the public sector.
Hosny, Kandil and Mohtadi (2013) sum up their study with “We hope that [results presented in their study] can help policy makers design effective industrial policies with regard to exchange rate management, easing credit and financial constraints, and stemming inflationary pressures, with the ultimate objective of attaining the aspirations of the public in the outset of a new era”. They also conclude that more efficient public spending is key to help growth in the private sector of the economy, and that higher inflation can harm growth as it increases the cost of domestic production and dependency on imports.
Recent data published by the ministry of development in Egypt reveals some positive developments. Specifically, one can notice a steady increase in the share of investments in the agricultural sector starting 2011 (see Figure 1). This illustrates the growing importance of investments this sector, although still at a small share. This should help with the government’s plan to support growth and provide job opportunities, especially in the rural areas. Easing business regulations and government bureaucracy for the private sector will be particularly important going forward as well, as the share of private investments in total investments has progressively increased over time, compared to declining shares in the public sector (see Figure 2).
Amr Hosny is a national of the Arab Republic of Egypt, and a research associate at the Economic Research Forum (ERF). He holds a PhD in Economics from the University of Wisconsin-Milwaukee, and his research areas are in the fields of open economy macroeconomics and economic development, with a focus on developing countries and the Middle East region.
