How Egypt is Getting Back to Business

The 2011 Egyptian revolution, which saw the deposition of President Mubarak, sent shockwaves through Egypt’s economy. Investment flows were suppressed and the subsequent turmoil and power struggles have led to a multitude of economic issues including high unemployment. It’s fair to say that foreign investors have had their confidence knocked over the past two years, but as 2013 draws to a close could Egypt by returning to business as usual?

Recent weeks have brought the positive news that travel restrictions to many parts of Egypt have been relaxed by the Foreign Office, which is a clear indication that stability is returning. This is good news for investors and good news for Egypt’s economy as it heralds the rebuilding of the tourist industry, a sector that makes up a significant portion of Egypt’s GDP.

The relaxation of restrictions looks set to prompt investors to continue operations in Egypt and to encourage staff and their families to move back to Cairo; the capital is one of the regions where travel restrictions have been relaxed and Foreign Office warnings are now no more serious than those listed pre-2011.

Business financing is absolutely crucial to bringing Egypt back to economic health. Luckily, many investors have not pulled out of Egypt altogether but have chosen to wait out the instability. This appears to be paying off. Positive signs that the economy is recovering include the condition of the Egyptian stock exchange. It rose above 6000 points in October 2013, restoring it to a level last achieved before the revolution.

Growth is another area in which a favourable forecast is boosting confidence. Whilst growth was at 7% in the years previous to 2011, it was at just 1.4% in 2013. Still, economic forecasters expect to see a rise to somewhere in the region of 4% by mid 2015. Such a projection should go some way to reassuring potential investors.

Billions of dollars of aid from the Gulf States have given Egypt a boost when it comes to getting the economy and infrastructure back on its feet. Investment potential remains in several lucrative sectors including petrochemicals, power and transport as well as tourism.

Investment incentives are currently in the pipeline and Egypt’s Ministry of Finance have indicated that non-tax incentives could be on their way. For entrepreneurs wishing to set up a small to medium sized business in Egypt, new laws will make it easier to licence a business, and there is now a 70 million US Dollar Start-Up fund.

Whilst Egypt is not yet fully back on its feet from an economic perspective there are certainly signs of positive improvement. This need to attract foreign investment is also creating favourable conditions, making 2014 an interesting year for Egypt in terms of investment potential.