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- GDP (PPP):
- $540.0 billion
- 2.2% growth
- 4.2% 5-year compound annual growth
- $6,545 per capita
- Inflation (CPI):
- FDI Inflow:
Egypt’s economic freedom score is 52.9, making its economy the 135th freest in the 2014 Index. Its overall score is 1.9 points lower than last year, reflecting declines in half of the 10 economic freedoms including investment freedom, property rights, and freedom from corruption. 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.
Over the 20-year history of the Index, Egypt’s economic freedom score has risen over 7 points, reflecting advancements in fiscal freedom and trade freedom. However, overall improvement has been held back by considerable deterioration in other areas, particularly the rule of law as measured through property rights and freedom from corruption. The country’s uneven reform progress has largely stalled in recent years, and scores for investment freedom and financial freedom have fallen back as well. Egypt is now on a downward path of economic freedom, registering its lowest score in 12 years in the 2014 Index.
Egypt’s lack of progress in advancing economic freedom has trapped many of its citizens in poverty and economic stagnation. As noted in earlier editions of the Index, institutional reforms are critically needed to ensure Egypt’s transition to a functioning market economy under an effective rule of law.
The Egyptian army ousted President Hosni Mubarak in February 2011 after massive protests destabilized his government. The Supreme Council of the Armed Forces assumed power pending election of a new civilian government. 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 and granted himself sweeping new powers in November. This led to his ouster in mid-2013. Domestic instability and political uncertainty have hurt tourism and foreign investment, both of which are important sources of foreign exchange. There have been limited market reforms, but the government still heavily subsidizes food, energy, and other key commodities.
Corruption is pervasive at all levels of government and has eroded trust in the economic system. The rule of law has been highly 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 titles to real property may be difficult to establish.
The top individual income and corporate tax rates are 25 percent. Other taxes include a property tax and a general sales tax. The total tax burden is 13.8 percent of GDP. Government spending is 32 percent of the domestic economy, and public debt, now over 80 percent of GDP, continues to rise. International support has buoyed delicate public finances amid political instability.
Launching a company and organizing new investment remain burdensome. Previous regulatory reforms have failed to create real momentum for dynamic entrepreneurial growth. In the absence of a well-functioning labor market, informal labor activity persists. Among energy-importing countries, Egypt has one of the highest levels of electricity and fuel subsidies; in 2012, outlays for subsidies soared by 42 percent.
Egypt’s average tariff rate is a relatively high 9.3 percent. Political unrest discourages new foreign investment. Investment flows have slowed significantly due to the challenging economic and political situation. The state-dominated financial system has been under stress, with negative impacts from the global economic slowdown exacerbated by domestic turbulence. Banking-sector reform programs have been stalled or derailed.