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Egypt’s response to the crisis
The global economic and financial crisis reduced the growth rate of the Egyptian economy from 7.2 per cent in 2008 to 4.2 per cent in 2009. An estimated 237, 000 jobs losses were recorded between the end of
2008 and the end of 2009, with a peak in job losses occurring in the first quarter of 2009. The labour market situation of youth and women deteriorated significantly. The crisis affected the Egyptian economy through
the decrease in the demand for exports of goods and services, and the decrease in FDI and in remittances. Between October 2008 and May 2010, Egypt introduced three stimulus packages worth 3.1 per cent of GDP
to revive its economy and create employment opportunities, especially for youth. Unemployment rates in February 2010 have declined for both men and women compared to one year earlier, albeit at a low pace.
Growth of GDP is expected to reach 5.0 per cent in 2010.
1. Economic and labour market overview
Egypt’s economy grew at an average rate of 7 per cent per annum over the past three years preceding the crisis in 2009. The crisis severely affected the economy, with growth declining 3.7 percentage points in
the fourth quarter of 2008 compared to a year earlier. Dwindling foreign demand entailed a slowdown in exports of goods and services which increased the trade balance deficit by 25 per cent in the second half of
2008 compared with a year earlier. Waning of current account receipts
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coupled with receding foreign investment flows of US13.2 billion in 2007-08 down to US8.1 billion in 2008-09 also resulted in a balance
of payments deficit for the first time in five years. In addition, remittances were down 4.9 per cent in the same period.
The Egyptian economy was more resilient to the spillovers of the crisis than might have been expected. The fourth quarter of 2009 witnessed a 0.9 percentage point increase in GDP growth compared
with a year earlier. The trend was accentuated in the first quarter of 2010 with the GDP growth rate standing at 5.8 per cent, in part due to government action to stimulate demand, create jobs and address social security
in the public sector. According to the IMF, GDP growth will be 5.0 per cent in 2010.
Job losses
: Since the start of the financial crisis, Egypt lost 237,000 jobs from 2008 to 2009 third quarter, year on year, with quarterly recorded job losses peaking at 137,000 in the first quarter of 2009. The
decrease in employment was unevenly distributed across sectors with the hotel and restaurants sector accounting for 12.6 per cent of the labour force, 2.8 million workers suffering the most. The lay-offs in the
hotels and restaurants sector was prompted by an industry slump as a result of a decline in the number of tourists down 2.3 per cent in 2009. Crisis measures put forward by the Government of Egypt targeted
employment recovery by targeting infrastructure projects and promoting small and medium enterprises through subsidized loans and private sector incentives. These measures helped to create 162,000 jobs in the
third quarter of 2009, and 900,000 jobs in the first quarter of 2010.
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For example the drop of Suez Canal receipts by 10.5 per cent in term of contribution to real GDP growth from October 2008 to March 2009 and the decline in customs revenues by 1 per cent for the fiscal year 2008-09 compared to the previous fiscal
year.
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Unemployment rate
: Prior to the financial crisis, the unemployment rate fell 2.5 percentage points to 8.7 per cent from 2005 to 2008, partly attributable to the success of structural and institutional reforms
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implemented by Egyptian authorities. Since the onset of the crisis, the unemployment rate increased by 0.8 percentage points to 9.4 per cent in the third quarter of 2009 compared to a year earlier. The unemployment
rate remained constant at around 9.4 per cent throughout 2009 before falling 0.3 percentage points in the first
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Tariff reductions, trade facilitation measures, customs administration enhancement implemented in 2004 and new personal and corporate tax code passed in July 2005.
Figure 1: Quarterly GDP growth rate, Y-o-Y differential of GDP growth and Quarterly unemployment rate
Source: MOF, CAPMAS.
Figure 2. Women and Men quarterly unemployment Rate
Source: MOF, CAPMAS
-3.7 9.0
8.4 9.4
9.1
8.2 8.4
8.6 8.8
9.0 9.2
9.4 9.6
-4.00 -2.00
0.00 2.00
4.00 6.00
8.00
QI 08 QII 08
QIII 08 QIV 08
QI 09 QII 09
QIII 09 QIV 09
QI 10 R
e a
l G
D P
g ro
w th
r a
te
U n
e m
p r
a te
real GDP growth Y-o-Y differentiel GDP
Unemployment rate
5.4 5.2
5.3 20.5
18.3 23.2
22.0
18.0 19.0
20.0 21.0
22.0 23.0
24.0
5.1 5.4
5.7 6.0
QI 08 QII 08
QIII 08 QIV 08
QI 09 QII 09
QIII 09 QIV 09
QI 10 M
e n
U n
e m
p r
a te
W o
m e
n U
n e
m p
ra te
Male unemployment rate Women unemployment rate
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quarter of 2010, as stimulus measures implemented during the crisis took effect. The unemployment rate of women peaked at 23.2 per cent in the second quarter of 2009, a 4.4 percentage point increase compared to a
year earlier. In contrast the male unemployment rate declined throughout 2009 and reached 5.2 per cent in the first quarter of 2010.
Labour force participation:
The Egyptian labour market faces the challenge of integrating 700,000 new entrants into the labour force every year, mainly youth. However the labour force increased by only
400,000 between July 2008 and July 2009, indicating discouragement amongst unemployed people. A decrease in the youth labour could also indicate longer stay in the education system. This decrease in the
labour force took place within the context of low labour force participation rates of women. The labour force participation rate of women increased 1.0 percentage point to 23.5 per cent in 2009 compared to a year
earlier, following a drop of 1.5 percentage points between 2007 and 2008. The participation rate of young women remains lower about 13 per cent in 2010 compared to other countries in the MENA regions
regional average of 21.5 per cent in 2008. Egypt has one of the lowest female participation rates in the world ranking 120 of 128 countries.
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When they are found in employment, young women tend to face adverse working conditions: 38.5 per cent of young women worked long working hours and 19 per cent
suffered from “harsh treatment at work” according to the Egypt Human Development Report 2010.
Poverty:
The share of the poor as a percentage of total population increased during the crisis from 19.6 per cent in 2004-005 to 21.6 per cent in 2008-009.
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The incidence of poverty in the rural areas went up from 26.8 per cent to 28.9 per cent over the same period, and from 1.7 per cent to 2.6 per cent in the urban
areas.
2. Measures taken to tide over the crisis
