Egypt is a crucial market for many of our clients. Its economy is the third largest in the Arab world after Saudi Arabia and the UAE. The country has strong ties with the West and has played an important negotiating role in the Israel-Gaza conflict. Egypt's main export is crude petroleum and the country also boasts a thriving textiles industry. We ensure our clients make sound investment decisions in Egypt, using our risk-assessed total analysis model. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 23 of Egypt's most important industries. Our analysts will make sure you, as our client, have the edge in Egypt.

Country Risk

Egypt Country Risk

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Core Views

  • 2015 will be a relatively positive year for the Egyptian economy, as the currency stabilises and investment returns to the county.

  • The fiscal and net export position will improve significantly on the back of fuel subsidy reform. Subsidy cuts will likely be watered down if public unrest occurs on a significant scale, however, the bulk of reform will remain in place.

  • Hikes to domestic energy prices will push consumer price inflation back into the double digits by the end of the year.

  • Egypt's geopolitical importance will ensure that even if an IMF agreement is delayed for longer than expected, further foreign aid commitments will materialise around the turn of the year. Western powers such as the US and EU have an interest in ensuring the North African country does not experience a more...

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Egypt Operational Risk Coverage (9)

Egypt Operational Risk

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BMI View: Egypt's operating environment presents a number of risks associated with its strong trade union presence, a significant threat of terrorist attacks, and an education system which falls short of supplying adequately skilled graduates for the labour market. In addition, the utilities network suffers from frequent shortages which disrupt business activity. On the positive side, Egypt benefits from good international supply chain connections and trade infrastructure, low utilities prices and a government seeking to encourage investment. The country has the largest population in the Arab world, with rising incomes and a high rate of urbanisation, and therefore offers an increasingly attractive consumer market.

Egypt receives a low score for almost every component of our Operational Risk Index. While there are some positives in terms of the breadth of education and low crime rates,...

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Egypt Crime & Security

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BMI View: Businesses operating in Egypt face moderate security risks especially when compared with the rest of the Middle East and North Africa region. As with most major states, Egypt experiences issues with petty crime; however, this varies across the country, with most crime occurring in Cairo and Alexandria, while the south is almost crime-free. That said, terrorist incidents have become increasingly common, and while they do not compare with attacks in other parts of the region, namely Iraq, Libya and Syria, terrorism is still a cause for concern. Egypt scores 26.8 out of 100 in our overall Crime and Security Risk Index, placing it 13th out of 19 Middle East and North Africa (MENA) states.

There is a generally low threat from crime in Egypt, and foreign workers and tourists in major cities are not...

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Egypt Labour Market

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Egypt's labour market presents a number of risks to investors, driven by significant income disparities affecting the composition and educational levels of the workforce. Investors face high costs of employment and poor labour availability, as urbanisation and female labour force participation rates are low on a regional comparison. We give Egypt an overall Labour Market Risk score of 40.6 out of 100 in our Operational Risk Index. This places the country 17 th out of 19 countries in the Middle East and North Africa (MENA) region, between Syria and Morocco (which have scores of 42.5 and 33.8 respectively).

Education risks are significant and appear to have worsened over the past two decades. While primary school is compulsory and free - leading to very high attendance rates - the quality varies substantially and Egypt is no longer the educational beacon of the Middle East that it once was. This presents several problems for...

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Egypt Logistics

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BMI View: Egypt's logistics network poses a number of risks to business activity, which will cool investor sentiment towards the country over the medium term. Of particular concern is the underdeveloped and overburdened utilities network, which results in shortages of electricity, fuel and water disrupting business operations. In addition, the poor quality of alternative transport options means that supply chains are subject to frequent delays due to their reliance on the congested road network. These logistics shortcomings threaten to hinder Egypt's economic growth, which is beginning to recover following the prolonged unrest since 2011. The main advantages for investors are to be found in extensive maritime and air trade connections, which reduce trading times and costs. Egypt is placed in the middle of the pack in the Middle East and North Africa (MENA)...

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Egypt Trade & Investment

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BMI View: Egypt is one of the less attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country lacks a well-defined and implemented legislative environment, and has relatively weak intellectual property rights. That said, there have been some improvements on this front as of late, which should continue with the entrenching of President al-Sisi's administration. We have awarded Egypt a score of 45.6 out of 100 for the overall BMI Trade And Investment Risk Index, placing it 12th out of 19 MENA states.

Egypt's poor infrastructure and convoluted, over-regulated labour market is an unattractive proposition, deterring potential foreign direct investment...

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Egypt Industry Coverage (23)

Agribusiness

Egypt Agribusiness

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BMI View: Egypt is the world's largest wheat importer and will benefit from the recent sell-off in grain prices. The country is in the process of reforming its food subsidy programme in an effort to make the process more efficient. We believe that particularly good growth prospects exist in the country's livestock and dairy industries, as cattle herds continue to recover from a foot and mouth outbreak in 2012. These sectors will also benefit from lower global grain prices relative to the last several years and an improving domestic economic situation.

Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)
...

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Autos

Egypt Autos

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While vehicle sales are currently on target to meet our forecast of 13% in 2015, the competitive landscape is where the shake-up is taking place as a result of Egypt's FTA with the EU. Sales of imported vehicles are growing at a much faster rate than domestically-produced sales, which are actually contracting and imports now account for a bigger share of the market than previously. This has prompted Daimler to withdraw from its local assembly operations as vehicles imported from Europe are most cost-effective, but we do not believe this marks the beginning of a mass exodus from the country.

Of the remaining manufacturers, Opel and BMW will be considered the most likely to follow suit as European brands. However, Opel is part of General Motors Egypt, which itself operates a joint venture plant with local partner Al-Mansour Automotive, and as such, it would be less likely to stop local...

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Commercial Banking

Egypt Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Egypt Consumer Electronics

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BMI View: As a significant easing of political and economic crisis unlocked strong growth in 2014, we demand in the Egyptian consumer electronics market staged a strong recovery. Growth will return to a slower, but more sustainable trajectory after a wave of deferred purchases were unlocked in 2014. Meanwhile, our in-house Country Risk team's view for more rapid depreciation of the Egyptian pound against the US dollar adds downside risk to our outlook. That aside, we have a positive medium-term outlook for Egypt's consumer electronics market, with a young population, low device penetration rates,...

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Defence & Security

Egypt Defence & Security

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BMI View:   At the end of 2014, security issues for Egypt both at the domestic and regional level continue to be of major concern. The BMI view is that Egypt's violent crack on all forms of political opposition risks pushing more and more young people - a key segment of the population - towards adopting extremist views in the long term. As the military seeks to continue strengthening its grip on power, we are expecting defence spending to increase both in absolute and relative terms in 2015.

Demonstrations amongst Egyptian youths continue in the Nile Delta, which we suspect has the potential to be the Achilles heel of the al-Sisi's regime. The collective punishment of entire communities in the Sinai also places the army at risk of losing the battle of hearts and minds against...

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Food & Drink

Egypt Food & Drink

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BMI View: Egypt is re-establishing its position as the standout growth market for consumer companies in the Middle East and North Africa (MENA) region and we believe this is a good time for food and drink companies to actively pursue expansion in Egypt, be it organically or via acquisitions. The pace of real GDP growth will pick up markedly over the coming years, helped by greater political stability and low base effects. Our view on the improving outlook for the economy, combined with an improving political scene, is being reflected by increased interest from multinational food and drink companies, including The Coca-Cola Company and Kellogg Company. This illustrates the attractiveness of the sector, which holds...

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Freight Transport

Egypt Freight Transport

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BMI View: Ongoing improvement in Egypt's political situation - with the election of President el-Sisi having brought in a level of stability not experienced since 2011 - will see the Egyptian freight transport sector enjoy continued expansion in 2015. While this will not be spectacular, we expect positive growth in volumes across all freight modes, supported by an improving consumer outlook, a recovery in the tourism sector, and increased construction. Crucially, the outlook is not only brighter for the near term, with significant investment into transport infrastructure ensuring continued growth over future years. Air freight will be the growth outperformer, boosted by a recovery in tourist numbers.

Following several quarters of anaemic growth, we...

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Information Technology

Egypt Information Technology

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BMI View: A more stable domestic political and economic environment, combined with a supportive policy environment, has helped the Egyptian IT market to return to a robust growth trajectory after disruption due to political crisis in recent years. However, short-term downside risk is still elevated due to Egypt's fragile political and economic environment, and our forecast for Egyptian pound depreciation against the US dollar in 2015. Additionally, the potential reduction of financial support to Egypt from Gulf states could...

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Infrastructure

Egypt Infrastructure

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BMI View: A growing and increasingly diversified construction project pipeline in Egypt will support solid industry growth in Egypt between FY2016 to FY2020. This outlook is premised on Egypt continuing to receive external funding and we highlight labour market risks as a key challenge to projects realisation.

Foreign direct investment (FDI) as well as development assistance are critical to Egypt's infrastructure development. As political stability and policy clarity, as well as pent-up demand, entice investors back into the country, our Country Risk team expects a significant upswing in FDI inflows into Egypt over the coming quarters.

Key Trends And Developments

  • An unprecedented number of...

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Insurance

Egypt Insurance

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BMI View: By most metrics, Egypt's insurance sector is under-developed and will remain so throughout our forecast period to 2019. Growth over the next five years will be driven mainly by the expansion of property insurance and the diverse 'other lines' sub-sector within the non-life segment. This, in turn, will be the result of greater access to reinsurance by the insurers.

Despite boasting a population of around 85mn, the third largest in Africa, Egypt's insurance sector is under-developed by the standards of most major economies and we note that at present, only 6% of Egyptians use insurance. This owes to the country's high poverty levels, relatively low incomes and GDP per capita and also the fact that many segments of the population remains unaware of the...

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Medical Devices

Egypt Medical Devices

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BMI Industry View: The Egyptian medical device market is fairly attractive in the Middle East and Africa region, with one of the fastest 2013-2018 CAGRs. Per capita medical device expenditure is low, which indicates the enormous potential for growth as the country has the second largest population in the region. As production is relatively limited, the market is reliant on imports. In a climate of relative political stability...

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Metals

Egypt Metals

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BMI View: We forecast modest growth in the Egyptian steel sector over the coming years, in line with our outlook for the wider economy. We expect the political situation to continue to show exhibit greater stability over the coming quarters and for stabilisation in the Egyptian pound.

We  remain positive about the effects of Egypt's transition towards a democratic government, as investors will begin to look more favourably towards the country as a potential market to work with. We have seen these positive effects on the country are already beginning to show. For 2014, we forecast steady Egyptian steel production growth on the back of greater investment in expanding production capacity and more stability in the country following the 2013 ouster of the Muslim Brotherhood, as well as greater investment pouring in from Gulf...

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Mining

Egypt Mining

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BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for sanctions to be eased from Q315 which will have be a game changer for the country's beleaguered mining industry and could make the country a key centre of global mining investment in the coming years...

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Oil & Gas

Egypt Oil & Gas

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BMI View: Fuel subsidy reforms, improvements in well-head gas prices and the initiation of liberalisation in the gas sector are boosting interest and investment in Egypt's upstream. We are positive on natural gas production and refining sector improvements, but imports will increase over the next three years.

Headline Forecasts (Egypt 2013-2019)
2013 2014e 2015f ...

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Petrochemicals

Egypt Petrochemicals

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The recovery of the Egyptian economy in the context of political stability should sustain growth in domestic petrochemicals consumption with rising consumer and industrial activity. Local petrochemicals companies will be seeking to capitalise on this growth by utilising the country's gas potential to produce more basic chemicals.

The construction sector will be lifted by infrastructure growth and strong fixed investment growth, which should boost consumption of construction-related petrochemicals products. Household consumption should follow an above-growth trend, but will be negatively affected by energy price hikes. While the automotive sector is set to grow by a third over the next five years, in historical terms it will remain well below its full potential.

Growth in consumption will absorb much of the increase in production capacity. There were plans for 24 new petrochemical production facilities, adding...

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Pharmaceuticals & Healthcare

Egypt Pharmaceuticals & Healthcare

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BMI View: The positive outlook for Egypt's pharmaceutical market has been reinforced, with access to medicines increasing through enhancing health insurance uptake and a greater interest among foreign pharmaceutical companies. This represents an impressive turnaround, given the region's political instability in recent years.

Headline Expenditure Projections

  • Pharmaceuticals: EGP23.03bn (USD3.25bn) in 2014 to EGP25.48bn (USD3.36bn) in 2015; +10.7% in local currency terms and 3.5% in US dollar terms. Forecast upgraded from Q215 following availability of new historic trade data.

  • Healthcare: EGP98.34bn (USD13.88bn) in 2014 to EGP107.69bn (USD14.21bn) in 2015; +9.5% in local currency terms and 2.4% in US dollar terms....

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Power

Egypt Power

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BMI View: We have long highlighted Egypt's desperate need for increased power infrastructure, with surging demand and lacklustre investment portending a significant energy crisis. Recent blackouts have made these problems more urgent, and the government has taken some steps to improve the situation over the past few months, aided by the recent dip in international energy prices. However, with the political situation still in a state of flux and the economic outlook uncertain, Egypt's ability to channel investment towards the sector is likely to remain limited in the medium term, and the sector will continue to face large challenges in the years ahead.

Egypt's power sector is enduring an exceptionally challenging period. Persistently high demand for energy, driven in part by the country's...

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Real Estate

Egypt Real Estate

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BMI View:   Egypt is only just beginning to recover from the political instability seen in the country over the previous three years. On top of this, regional violence and strife have added a further deterrent to would be investors. Instability is also keeping away tourists, negating one of the most powerful drivers of the Egyptian economy. Nevertheless, holding an important position within regional culture and with demographic trends on its side, the country's economy continues to move forward, and there are many signs that the real estate market may be turning a corner.

Political upheaval, first the overthrow of long-time dictator Hosni Mubarak in 2011, followed by the removal of the democratically elected president Mohamed Morsi, has led to economic stagnation and flight of foreign capital. In recent quarters the government...

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Retail

Egypt Retail

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BMI View: As stability has slowly returned to the country and economy, growth has also picked up which has led to an increase of income and spending power. The expected increase in the proportion of those in the middle income bracket (USD10,000+), will lead to an increase in demand for luxurious goods as well as a change in the makeup of the retail formats in the industry which has been dominated by unorganised retail and extremely fractured in nature. The change in preferences has led to a growth in the number of malls and hypermarkets, as well as the growth that has rapidly affected the e-commerce industry as Egypt modernises. The overall outlook for retailers is therefore positive as there will be a number of opportunities to become established in the growing retail industry in Egypt.

The Egyptian retail industry has been traditionally characterised by traditional informal and unorganised...

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Shipping

Egypt Shipping

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BMI View: Our outlook for Egyptian ports is fairly mixed. Although the economy's recovery will bolster demand for shipping services, the growth driver will largely be investment, while private consumption will falter. We expect acceleration in gross fixed capital formation (GFCF) in Egypt over the coming quarters on the back of relative political stability and policy continuity as well as substantial pent-up demand. We expect that this will drive up gross tonnage volumes at Egyptian ports. However, fuel subsidy cuts and elevated inflation will ensure household consumption growth remains relatively slow over the coming quarters, even with lower global oil and food prices. Hikes to domestic energy prices will have a pronounced impact on spending patterns, as households are forced to devote a greater share of their incomes to fuel. This will impact on consumer demand for...

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Telecommunications

Egypt Telecommunications

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BMI View: Inevitably, legal challenges and operator disinclination to commit to investing in wireline infrastructure have delayed the introduction of the new unified service licensing regime. This will delay Telecom Egypt 's move into the mobile services market which would have freed it from its joint venture with Vodafone and given it greater freedom to develop advanced convergence services. The mobile operators' decision to lease capacity on TE's fixed infrastructure and international gateways rather than take up unified licences reflects the difficulties anticipated in deploying costly duplicate networks that would add little value to existing offers. Nevertheless, some additional infrastructure is certainly required as TE would struggle to meet the increased demand for data traffic coming from...

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Tourism

Egypt Tourism

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BMI View : Egypt's tourism market is recovering well from the sharp declines seen in 2011 and 2013 which followed in the wake of large political uprisings, the subsequent changes of government and decline in internal security. With visitor numbers returning to growth, we are seeing renewed interest from international hotel developers, and a number of new projects are coming to the market. We currently expect both inbound and outbound tourism to grow steadily over the forecast period, though we caution this growth is dependent upon the maintenance of domestic security and political stability.

Egypt is very well established as a popular tourism destination. The country offers a broad choice of attractions,...

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Water

Egypt Water

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BMI View: This quarter has seen the extensive upgrading of our water sector forecasts for Egypt, which now include mains and sewage network connectivity, desalinated water production, non mains consumption and treated wastewater forecasts. We have also revised our existing forecasts to take the new data into account. Overall, we believe that the political recovery, and influx of financial support and foreign investment from various sources including the UAE and the US, will improve the country's economy, and increased stability will encourage sustained water infrastructure investment. Given the ongoing risks of reduced water availability due to the Ethiopian dam plans, we view the additional investment as crucial to boosting Egypt's water resources over the medium term.

The election of President Abdel Fattah al-Sisi has been positive for Egypt's infrastructure development and the country's...

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