2013 Index of Economic Freedom

Egypt

overall score54.8
world rank125
Rule of Law

Property Rights35.0

Freedom From Corruption29.0

Limited Government

Government Spending69.4

Fiscal Freedom85.6

Regulatory Efficiency

Business Freedom63.3

Labor Freedom43.3

Monetary Freedom58.4

Open Markets

Trade Freedom73.8

Investment Freedom50.0

Financial Freedom40.0

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Quick Facts
  • Population:
    • 79.4 million
  • GDP (PPP):
    • $519.0 billion
    • 1.8% growth
    • 5.1% 5-year compound annual growth
    • $6,540 per capita
  • Unemployment:
    • 12.2%
  • Inflation (CPI):
    • 11.1%
  • FDI Inflow:
    • $-482.7 million
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Egypt’s economic freedom score is 54.8, making its economy the 125th freest in the 2013 Index. Its overall score is 3.1 points lower than last year, reflecting declines in seven of the 10 economic freedoms, especially investment freedom and labor freedom. Egypt is ranked 13th out of 15 countries in the Middle East/North Africa region, and its overall score is below the world and regional averages.

Given its challenging political and economic transition, the Egyptian economy has been experiencing an extended period of instability and uncertainty. Much-needed improvements in economic policy have been delayed, and the effectiveness of reforms that might have helped to open markets and improve productivity has been undercut by the fragile rule of law and the legacy of Egypt’s socialist past. A new, higher top tax rate of 25 percent applies to both individuals and corporations.

Deeper institutional reforms are critically needed to spur lasting economic growth and development. Those reforms include strengthening of the judicial system, better protection of property rights, and more effective action against growing corruption.

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Background

The Egyptian army ousted President Hosni Mubarak in February 2011 after massive protests and violent police responses destabilized his government. Mubarak had been in power since 1981. Following his ouster, the Supreme Council of the Armed Forces assumed power and promised to prepare for free parliamentary and presidential elections. Parliamentary elections were held in January 2012, but the parliament was dissolved in June 2012 after the Supreme Constitutional Court ruled that one-third of its members had won their seats illegitimately. Mohamed Morsi of the Muslim Brotherhood’s Freedom and Justice Party won the June 2012 presidential election, but his authority has been limited by SCAF edicts. Domestic instability and continued political uncertainty depress tourism revenues and foreign investment, both of which are important sources of foreign exchange. Despite efforts to make the economy more market-oriented, socialist policies continue, and the government heavily subsidizes food, energy, and other key commodities.

Rule of LawView Methodology

Property Rights 35.0 Create a Graph using this measurement

Freedom From Corruption 29.0 Create a Graph using this measurement

The rule of law has been unstable across the country, and the judicial system’s independence is poorly institutionalized. Judicial procedures tend to be protracted, costly, and subject to political pressure. Property rights are not protected effectively, and prices for private political-risk insurance have skyrocketed. Corruption continues to erode trust in the economic system.

Limited GovernmentView Methodology

The top income and corporate tax rates are 25 percent. Other taxes include a property tax and a general sales tax (GST). The overall tax burden is estimated to be around 13.9 percent of GDP. Government spending has fallen to one-third of total domestic output, despite deficits of nearly 10 percent of GDP and rising public debt of over 70 percent of GDP. Slow growth as a result of political unrest has hampered revenue collection.

Regulatory EfficiencyView Methodology

Previous regulatory reforms, including establishment of a “one-stop shop” for investment, made starting a business less time-consuming and costly, but without needed reforms in other areas, they have proven to be largely cosmetic, failing to create real momentum for dynamic entrepreneurial growth. In the absence of a well-functioning labor market, informal labor activity persists in many sectors. Monetary stability is weak.

Open MarketsView Methodology

Egypt has opened its markets to global trade and investment, but non-tariff barriers continue to constrain trade freedom. The investment regime has been stable, but flows have slowed significantly due to the challenging economic and political situation, and the central bank has imposed controls on capital transfers. The state-dominated financial system has been stressed, with negative impacts from the global crisis exacerbated by domestic turbulence.

Country's Score Over Time

Bar Graph of Egypt Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Egypt to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.50.3
2Qatar71.30.0
3United Arab Emirates71.11.8
4Jordan70.40.5
5Oman68.10.2
6Israel66.9-0.9
7Kuwait63.10.6
8Saudi Arabia60.6-1.9
9Morocco59.6-0.6
10Lebanon59.5-0.6
11Tunisia57-1.6
12Yemen55.90.6
13Egypt54.8-3.1
14Algeria49.6-1.4
15Iran43.20.9


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