What does COVID-19 mean for Egypt’s economy?

By Ambassador Yasser Elnaggar as featured on Middle East Institute

COVID-19 has disrupted both supply and demand around the world. Egypt is not immune to the recessionary trends caused by the sudden halt in supply chains and the sharp decline in demand, domestically and globally, resulting from the rapid spread of the virus. The drop in economic activity is even more evident in a country that has adopted fiscal consolidation measures and increased public spending on major infrastructure projects that are now underway. These policies worked while the economy was strong, but it is time to consider new strategies to promote the private sector as the government faces some tough decisions ahead.

The Egyptian government adopted an ambitious reform program starting in 2016, which included a currency devaluation, liberalization of certain sectors, and a phased lifting of state subsidies. The implementation of these reforms was coupled with a high inflation rate, and as a result, disposable income has been shrinking and consumer demand in the domestic market has weakened.