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Economic reforms

Egypt’s economy, the second largest in the Arab world after Saudi Arabia, has benefited from a number of reforms over the last 30 years, to what was previously a highly centralised economy. As a result of the recent reforms made by Prime Minister Ahmed Nazif in 2005, personal and corporate taxes have been reduced, and so have energy subsidies. Egypt’s stock market responded well to the changes, and the country’s GDP rose by around 5% between 2005 and 2006. Inflation has sunk considerably from 18.1% in 2004 to 3.1% in 2006. Private business now accounts for around 80% of the country’s economy. It is believed that the condition of the economy is conducive to further growth, making it increasingly attractive to foreign investors, offering more job opportunities (the unemployment rate is 10.3% - 2006 estimate) and boosting the wealth of its residents.

Sustained growth

The government is likely to continue with its programme of economic reform, largely due to the fact that that strong and sustained economic growth will generate employment opportunities and raise living standards for Egyptians which, it is thought, will lessen the appeal of radical Islamists. This sustained growth, along with increasing liberalisation, will help to bolster the appeal of Egyptian real estate for international investors.

Growing middle class

Egypt’s increasing domestic wealth is already reflected in the growth of its middle class, and foreign investors are keen to capitalise on the rising purchasing power of the Egyptian people. Although demand for property in Egypt is increasing, both on the rental side for holiday accommodation and on the resale market for second-homes, a strong domestic demand together with a wealthy population enhances the stability of an advancing marketplace.

Foreign investment

The Egyptian government has implemented reforms in order to encourage investment from abroad, and the inflow of foreign direct investment (FDI) has increased accordingly. During the period 2005 – 2006, Egypt received 15% of the total FDI inflows into Africa, a total of US$10.7 billion, according to research conducted earlier this year by Standard and Poors, who called it a “notable increase”. The report predicted that on-going FDI would be supported by Egypt’s investment into tourism and its access to the EU markets. It was reported by ‘CNBC European Business’ magazine that FDI receipts trebled in the 18 months leading up to September 2006, and the makeup of the investment was promising: over 80% was from new business – rather than funds related to increasing privatisation – showing that Egypt’s FDI increases are not purely a result of its dramatic economic reforms.

Related items

Documents and Reports

	Egypt property investment report (392Kb)
Documents and Reports

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