Economic Environment: Scenario Analysis Of Egypt

Egypt is a developing country, the economy is lower to middle income. In the world, it is the 43rd leading by nominal GDP and 21st by GDP (PPP).It’s economic structure relies mainly on service and industry. 54% of their GDP comes from service and 34.3% of GDP comes from industry.

Egypt’s economy is emerging slowly. The gross domestic product grew to 5.6% in the third quarter of 2019 against 5.4% in the same period of 2017-2018. The gross domestic product per capita in Egypt was 2907.30 US dollars in 2018. The GDP per Capital in Egypt is equivalent to 23 per cent of the world’s average. The North African state is now targeting 6% GDP growth in the 2019/20 fiscal year. (Prescott., J. 2019. Changing Egypt’s economic perspective. Euronews).

CPI (Consumer price index ) rate was 20.86% in 2018 and in 2019, it becomes 23.5%. According to the data of 2019, the Unemployment rate is 12.1%. GDP (PPP) is 1.2 trillion, 4.2% growth. The GDP per Capita, in Egypt, when adjusted by Purchasing Power Parity is equivalent to 62 percent of the world’s average. (Economy of Egypt. Wikipedia. 2019).

Egypt’s economy was highly centralized based on the substitution of import. They buy from others more and sell other countries less. A series decided to relieve huge debt in the 1990s that may help Egypt improve its macroeconomic performance. Though significant risks remain in terms of debt size, composition and contingent liabilities, government debt is estimated to have decreased to 90.5 percent of GDP in end-June 2019, from 97.3 percent of GDP in the end- June 2018. (Economy of Egypt. Wikipedia. 2019).

Ongoing regulatory reforms have made starting a business less time-consuming, but registering property has become more expensive. Informal labor activity persists in many sectors. In the absence of a well-functioning labor market. The government continues to reduce electricity subsidies and plans to suspend all petroleum product subsidies by 2019 to control the debt.

Egypt has a rather stable mixed economy enjoying average growth. Economic growth should stabilize in FY 2020. Particularly, higher government spending, improved ease of doing business and lower interest rates should lead to fixed investment growth.

Egypt’s economic freedom score is 52.5, making its economy the 144th freest in the 2019 Index. its overall score has decreased by 0.9 point, with declines in scores for monetary freedom, business freedom, and judicial effectiveness. Foreign investment in several sectors of the economy is restricted, and numerous state-owned enterprises distort the economy. About 40 percent of adult Egyptians have access to an account with a formal banking institution. (Egypt. 2019 INDEX OF ECONOMIC FREEDOM).

It found that 33% of Egypt’s 99m people were classified as poor last year. The World Bank said in April that 60% of Egyptians were “either poor or vulnerable”. (CAIRO. 2019. Egypt is reforming its economy, but poverty is rising. The Economist.)

Data for the first nine months of FY19 show that this pickup is driven by net exports. On the sectoral side, gas extractives, tourism, wholesale and retail trade, real estate and manufacture have been the main drivers of growth. Unemployment decreased to 7.5 percent from 9.9 percent in a year. (The World Bank In Egypt. 2019, October 1. The World Bank.)

Implications:

Opportunities Rating Threats Ratings

Production of goods 3 Production of quality goods 4

Low labor cost 4 Natural resources 5

Production of fashionable goods 3 Low income 4

Pinatex is mainly made by the fiber of pineapple. From the scenario analysis of Egypt, the above implications are found to be relevant before considering Pinatex to make entry into the Middle East market.

In Egypt, it is visible that Egypt highly emphasizes on the production of goods which also includes textile industries. Textiles and clothing is one of the largest manufacturing and exporting processes in the country. So, it is one of the most significant opportunities for Pinatex to enter into this market. They import the raw materials from other countries and make products in the domestic area because of their low labor cost. It also can be a great opportunity for Pinatex to enter into this market. Labor cost is to low in Egypt. The Egyptian apparel industry is attractive for rapidly changing fashions. People like new fashionable products like bags, clothes, watch, shoes. So, Egyptians can make Pinatex and make products made by Pinatex in a fashionable way that may capture people to buy goods made by Pinatex.

Egypt produces goods and export to other countries. But as they are developing, GDP is low, their economic condition is not so good,it is a must that they cannot import massive high-quality raw materials for production.

We know that high income leads to high consumption. Egypt is a developing country where Egypt’s people income is low. They will not be able to consume products made by Pinatex. So, if the products made of pinatenax will not be sold, it can be a threat. Egypt’s natural resources include petroleum, natural gas, phosphates, and iron. Egypt loses agricultural land every year and it has a shortage of water to produce tress. The main ingredient of Pinatex is pineapples and which are not produced in Egypt because of the countries weather condition.

1. https://tradingeconomics.com/egypt/consumer-price-index-cpi
2. https://www.economist.com/middle-east-and-africa/2019/08/08/egypt-is-reforming-its-economy-but-poverty-is-rising
3. https://www.worldbank.org/en/country/egypt/overview
4. https://www.heritage.org/index/country/egypt
5. https://www.focus-economics.com/countries/egypt
6. https://www.euronews.com/2019/11/06/changing-egypt-s-economic-perspective
7. https://en.wikipedia.org/wiki/Economy_of_Egypt