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.
Egypt Country Risk
2016 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...
Egypt Operational Risk Coverage (9)
Egypt Operational Risk
Egypt Operational Risk
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. However the deteriorating security environment in the country makes Egypt a less attractive destination for investment than its regional counterparts. Consequently...
Egypt Crime & Security
Egypt Crime & Security
BMI View: The security situation in Egypt has deteriorated considerably following the overthrowing of President Mohammed Morsi in July 2013 by way of a military coup. The security forces under new President Abdel Fattah al-Sisi have since struggled to contain a widening economic gap, endemic corruption and the escalating instability in the Sinai region which has caused terrorist attacks to spread and escalate in major cities such as Cairo. This was further exacerbated by the crackdown on dissidents and opposition groups such as the Muslim Brotherhood in the country. Conflict risks within Egypt's borders will remain high in the medium term, increasing security costs for businesses. Crime risks remain high as corruption further corrodes the police force...
Egypt Labour Market
Egypt Labour Market
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 17th out of 19 countries in the 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 employers. Most notably, the education...
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...
Egypt Trade & Investment
Egypt Trade & Investment
BMI View: Egypt is one of the less attractive destinations for trade and investment in the 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...
Egypt Industry Coverage (23)
BMI View: Egypt will face growing production deficits in grains and meat as it focuses on export-oriented cash crops while the dairy sector will benefit from sustained private investment. Out to 2019, an expanding population and rising disposable incomes will support consumption growth in sugar and dairy products. Moreover, rice and beef consumption will benefit from the greater range of products available under the new food subsidy scheme.
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|BMI Market Value By Commodity (2011-2019)|
|f = BMI forecast. Source: FAO, BMI ...|
BMI View: The weaker pound will result in further market contraction in 2016 as both imports and components for local assembled cars will become more expensive.
|Passenger Car & Light Commercial Vehicle Sales|
|e/f = BMI estimate/forecast. Source: AMIC, BMI|
The weaker pound will see market sales decline again in 2016.
Local manufacturing is becoming less viable owing to currency shortages and FTAs with Europe...
Egypt Commercial Banking
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Egypt Consumer Electronics
BMI View: We hold a positive outlook for the Egyptian consumer electronics market in our Q1 2016 report update. We had made modest downwards revisions in our Q415 report update to better reflect the negative impact of currency depreciation on consumer electronics sales. In 2016, we are anticipating the market to post stable growth of 5.8% to reach a total market value of USD3.9bn. Over the medium term, we expect the market to settle on a slower growth rate, with the wave of deferred purchases unlocked in 2014 not to be repeated. Overall, we have a positive medium-term outlook for Egypt's consumer electronics market, with a young population, low device penetration rates, rising incomes and...
Defence & Security
Egypt Defence & Security
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...
Food & Drink
Egypt Food & Drink
BMI View: Egypt's food and drink industry is poised for positive growth. A large consumer base, improving economic prospects, low base effects and improved political stability will drive Egypt's tourism industry, with concomitant effects on food and drink. Continued investment by multinational corporations into Egypt's food and drinks industry bolsters our view that the country presents robust growth opportunities. That said, high inflation will dampen growth over 2016...
Egypt Freight Transport
BMI View: Egypt's economic growth will gather steam over the coming quarters on the back of political stability, pent-up demand and a weaker currency. While this will be good for the country's exports, it does mean that the country's domestic consumer demand for imports of container goods - whether transported by air or in intermodal containers - will falter. However, support in this regard will come from the steady improvement in the tourism sector, where increasing political stability and a weak currency will encourage returning visitors, with their own demand for goods imports.
Although our growth forecasts for volumes carried on Egypt's different freight modes in 2016 and 2017 - namely Air, Road and Rail - are not for spectacular growth, they are nevertheless positive, and will remain so over the course of our forecast period to 2020, due to a relatively...
Egypt Information Technology
BMI View: We expect the Egyptian IT market to perform well over the medium term to 2019. BMI predicts relatively strong growth in the IT sector in 2016 due to a generally supportive policy environment and a low penetration rate of PCs and IT services. However, the deterioration of the security situation in Egypt towards the end of 2015 is already impacting the country's economy: the central bank may allow the Egyptian pound to fall further into depreciation, which could place additional upward pressure on the price of electronic imports.
Latest Updates & Industry Developments
Computer hardware sales will increase from EGP8.8bn in 2016 to EGP11.6bn in 2019, up by a compound annual growth rate (CAGR) of 9.8% in local currency terms. A minor downgrade reflects faster depreciation of the Egyptian pound against the US dollar, which...
BMI View: Strong government support for PPPs and a growing infrastructure project pipeline reinforce our positive outlook for Egypt's construction industry in 2016. The recent deterioration in the security situation will have a direct impact on investment in the tourism industry and as such commercial construction projects are at risk of being delayed and cancelled.
Key Trends And Developments
We maintain our construction industry real growth forecast for Egypt in 2016 at 8%, given the large project pipeline and solid foreign investor interest in the market.
The Egyptian government has the announced that it will tender 12 public-private partnerships (PPP) in the next 12 months. According to the Egyptian Ministry of Finance's PPP Central Unit, the new PPPs will be worth around USD4bn and...
BMI View: Egypt's insurance market faces significant structural challenges, including cultural barriers to traditional insurance cover and low household income rates which limits demand. The market is evolving, however, and significant growth potential is presented by takaful insurance and microinsurance products which make cover more affordable. We do expect to see slow but steady growth in both life and non-life insurance premiums over our five year forecast period to 2019, supported by domestic economic growth and an improving regulatory environment which is likely to attract more foreign firms to the market.
Egypt Medical Devices
BMI View: The Egyptian medical device market will remain fairly attractive in the Middle East and Africa region, due to its large size. Per capita medical device expenditure will be low, but there is enormous potential for growth as the country has the second largest population in the region. As production is relatively limited, the market will remain reliant on imports. In a climate of relative political stability and positive economic outlook, the public sector needs modernisation, therefore opportunities will exist for medical device companies.
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...
BMI View: The mining sector of the Middle East and North Africa will see strong growth in over the coming years, especially given easing sanctions on Iran. 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 Q116 which will have be a game changer for the country's beleaguered mining industry...
Oil & Gas
Egypt Oil & Gas
BMI View: Pledged investment in upstream developments and LNG imports will be crucial to meeting gas demand over the next five years, while the Zohr discovery could solve Egypt's gas challenges in the long term. Policy slippage with subsidy reform and payment schedules to oil and gas companies, pose the largest risk to slowing the positive momentum.
While Egyptian market growth experienced some slowdown in 2015, the local petrochemicals industry managed to defend sales and even hike prices in Q4 due to the depreciation of the Egyptian pound and disruption to imports. The industry is likely to experience sustained growth as domestic capacities expand. However, upstream resources need to be secured for the petrochemicals industry to be taken to the next level.
Egypt is one of the most promising growth markets for petrochemicals and in spite of infrastructural and feedstock constraints it is set to become a significant exporter of petrochemicals over the long term. Plans will be put into operation in 2016 for a series of new plants over the next five years, culminating in Carbon Holdings' world-scale Tahrir Petrochemicals project, which is set to come into commercial operation in 2020.
While local production is...
Pharmaceuticals & Healthcare
Egypt Pharmaceuticals & Healthcare
BMI View: Egypt's evolving demographic and epidemiological profile will support pharmaceutical growth over the long-term. The Egyptian government's commitment to healthcare has been demonstrated through significant increases to national budget allocations for the health sector. We note that the government is demonstrating increasing will to implement policy reforms within the health sector, boosting Egypt's attractiveness to international pharmaceutical companies. However, questions regarding financial feasibility will be raised. The country's improving political outlook and gradual economic recovery, albeit a slow one, will add to the market's attractiveness; however, regional instabilities remain a deterrent to company interest.
Headline Expenditure Projections
BMI View: The demand for power in Egypt will increase in the medium- and long term. We forecast total electricity generation will grow 4.46% in 2016 as the government brings gas and coal capacity online to overcome chronic power shortages. New power projects are moving forward and have received financial assistance from various global institutions. Thermal, renewable and nuclear power projects are all set to be developed to meet growing demand. These investments are the result of greater political stability and ...
Egypt Real Estate
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...
BMI View: A continuing increase of overall economic activity will help to boost total household spending in Egypt throughout 2016. After the terrorist attacks in 2015, the country's tourism sector will suffer from a short-term decline in tourist inflows. However, improvements in the labour market will lead to higher household revenues and spending. Large retailers, such as LuLu Group and MAF Group , will continue their push into the country as its MGR sector modernises rapidly.
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BMI View: We hold a positive outlook on the Egyptian shipping sector in 2016. We forecast a universal uptick in volumes passing through the country's ports, in terms of both containers and gross tonnage. This view is predicated on both the macroeconomic backdrop and the fundamentals facing the shipping and freight transport industries themselves.
With regards the economy, we expect growth to accelerate in the coming quarters, as Egypt finally begins to shake off the poor macroeconomic performance it has been saddled with in the years since President Mubarak's ouster in 2011. Fixed investment will be a key driver of growth, and this will drive up bulk and project cargoes through the country's maritime facilities.
This uptick in investment will also help boost the shipping sector directly. In August, the expanded Suez Canal opened, having been rushed...
|Large Potential for Growth|
|3G/4G Subscriptions and Total Mobile Subscriptions (2013-2019)|
BMI View: The long delay of Telecom Egypt (TE)'s entry into the mobile market as a mobile virtual network operator (MVNO) is due to its inability to reach an agreement with the three existing mobile players, Vodafone, Mobinil and Etisalat. This is not surprising given that additional mobile competition would drive ARPUs down further, when they are already as low as EGP25 (USD3.11) as of June 2015....
BMI View: The short-term outlook for Egypt's tourism industry is extremely poor. The downing of the Russian airliner over Sinai in October 2015 led to the widespread cancellation of flights, evacuation of thousands of tourists and suspension of further flights to Sharm el-Sheikh until 2016. Many governments are now advising against all but essential travel to the country and tourism in many regions has largely collapsed, leading to the Tourism Ministry estimating monthly losses at around EGP2.2bn (USD280mn). Prior to these events we were forecasting a recovery in the tourism sector but this has now been pushed back to 2017 and is heavily dependent upon an improvement in the security situation.
BMI View: The Egyptian water sector is relatively well developed with regards to extraction and distribution; however, the wastewater and sanitation segments need much more investment. The Middle East is classed as a water stressed area, and the whole region is losing water at a dramatic pace as resources are over-used beyond renewal rates, and demand continues to increase across the board. Wastewater, if properly harnessed, represents a vast resource of low-quality water suitable for agricultural irrigation and some industrial consumption.
We believe Egypt's continued state of unease is likely to affect the development of the water sector. In particular, we believe that despite the public's vocal desire for better services and water access, funds will continue to remain limited, hampering the overall development of existing water infrastructure. Egypt remains politically and...