Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.
Top Economic Indicators
Egypt is an important strategic partner of the United States. Egypt and the United States share many mutual interests, including strong commercial ties. Egypt’s current population of over 103 million and Gross Domestic Product (GDP) of $402.8 billion offer solid opportunities for U.S. firms in the medium-to-long term. Egypt’s strategic location offers companies a platform for their commercial activities into the Middle East and Africa.
Egypt is the United States’ 41st largest goods export market in the world, the top export market for U.S. goods and services in Africa, and the fourth largest export market for goods and services in the Middle East. While the economic slowdown caused by the COVID-19 pandemic resulted in a 20 percent drop in U.S.-Egyptian trade in 2020 from 2019, overall trade rebounded 18.1 percent from 2020 to 2021 to a value of $9.1 billion. U.S. exports to Egypt were $5.0 billion in 2021, up 12.6 percent since 2020. Egyptian exports to the U.S. were $3.2 billion last year, an increase of 35.5 percent in value from 2020.
U.S. exports to Egypt include agricultural goods, transportation equipment, chemicals, machinery, and computer and electronic products. U.S. imports from Egypt include apparel, petroleum, processed foods, textiles, and chemicals. The U.S.-Egypt Qualifying Industrial Zone (QIZ) program promotes stronger ties between Egypt and Israel, as the United States waives duties on Egyptian imports if the value of the imports include 10.5% Israeli content,
Textile and apparel exports are the largest Egyptian non-fuel exports to the United States with a value of $1.1 billion, representing 45.1% of all Egyptian exports to the U.S. in 2021. In 2021, QIZ exports to the United States were $1.2 billion. Textile and apparel exports represented 94 percent of all of Egypt’s QIZ exports. Chemicals, minerals, fertilizers, glass, and agricultural products accounted for the remaining six percent of QIZ exports. The textiles and apparel industry is the second largest industrial employer in Egypt, employing 15 percent of Egypt’s manufacturing workforce and nearly half of women working in manufacturing. The industry accounts for 3.5 percent of Egypt’s GDP.
Egypt’s economy is diverse. The bulk of output comes from the agriculture, manufacturing, energy, and services sectors. Agriculture accounts for 28 percent of all jobs and 11.3 percent of GDP. Egypt relies heavily on imported wheat, corn, and soybeans,
Egypt is hosting the 27th United Nations Climate Change Conference (COP 27) in Sharm el Sheikh November 7-18, 2022. The Government of Egypt (GoE) is pursuing more energy efficient and environmental projects as part of its vision for more green and renewable energy sources.
Egypt has been strongly impacted by the COVID-19 pandemic. However, as a result of quick mitigating actions taken by the GoE and ongoing International Monetary Fund (IMF)-required reforms, the economy grew by 5.9 percent in 2021, one of the highest growth rates in the Middle East and North Africa (MENA) region. Furthermore, Egypt’s GDP is projected to grow by 5.2% in 2022/23. The tourism sector had been greatly impacted by the COVID-19 pandemic and came to a standstill at the beginning of the outbreak. The sector is now recovering with more international flights resuming and tourists not needing to take a pre-flight COVID-19 test.
Global inflation/Russian-Ukrainian Conflict
Inflation in Egypt reached 8.8 percent in February 2022 and is likely to remain at a similar level, as Egypt relies heavily on imported raw materials. The Central Bank of Egypt (CBE) raised rates by one percent on March 21, 2022 in direct response to soaring inflation and rising pressure from investors who were abandoning emerging market securities for safer markets following the Russian invasion of Ukraine. The CBE devalued the Egyptian pound, which had remained stable since November 2020, from EGP 15.7 to EGP 18.2 (almost 16 percent) to the U.S. dollar to protect reserves and respond to mounting pressures from global inflation. The customs exchange rate (traded rate for imports) was adjusted to a more moderate rate of EGP 16.0 to the U.S. dollar, partially offsetting the adverse impacts of the devaluation on consumers and businesses domestically. The CBE is trying to maintain a more flexible exchange rate.
Egypt and the United States signed a Bilateral Investment Treaty in 1982 to promote and facilitate investment between our countries. Egypt and the United States entered into a Trade and Investment Framework Agreement (TIFA) in 1999. The agreement establishes a framework for expanding trade while resolving outstanding disputes between both countries. The TIFA is a natural step towards negotiating a free trade agreement. American firms are active in most sectors of the Egyptian economy, including oil and gas exploration and production, healthcare, transportation, financial services, manufacturing, construction, telecommunications and information technology, and the restaurant and hospitality industry.
The U.S. is the third largest foreign investor in Egypt with $2.0 billion invested in 2021. The United Kingdom and Belgium have been the two largest investors over the past decade with $6.8 and $2.2 billion invested in 2019. The total stock of U.S. Foreign Direct Investment (FDI) is nearly $24 billion with $20 billion concentrated in the oil and gas sector. (Overall, nearly 75 percent of Egypt’s FDI goes to the oil and gas sector). For the fourth year in a row, Egypt was the top FDI destination in Africa and was the second largest FDI destination in the Middle East.
The GoE understands that attracting FDI is key to addressing many of the economic challenges it faces, including low economic growth, high unemployment, current account imbalances, and hard currency shortages.
The GoE also hopes to attract international investment in several “mega projects,” including a large-scale industrial and logistics zone around the Suez Canal; the new national administrative capital; a 1.5 million hectare agricultural land reclamation and development project; several petrochemical plants and refurbishing refineries; upgrades to the country’s ports, airports, and transportation network; and extraction of mineral resources in the Golden Triangle economic zone between the Red Sea and the Nile River.