Key Drivers of Egypt’s Economic Growth – Who is Actually Pulling the Cart?
November 2024 2024-12-11 15:33Authors
Islam Abdelbary
Abeer Rashdan
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Key Drivers of Egypt’s Economic Growth – Who is Actually Pulling the Cart?
Abstract
| This chapter analyzes the drivers of economic growth in Egypt from 1981 to 2022, using the decomposition of the aggregate demand approach. It examines the contributions of consumption, investment, government spending, and net exports to real GDP growth during four distinct phases, each characterised by major domestic political and global economic shifts.The analysis revealed that consumption was the dominant driver of growth throughout the study period, reflecting the importance of household spending in stimulating aggregate demand. However, the economy’s overreliance on consumption without a corresponding increase in productive investment led to volatile growth patterns and limited structural transformation. Investment played a crucial role in driving growth during periods of economic liberalization and openness, but it was often volatile due to political and economic uncertainties. Government spending had a mixed impact on growth, as it provided essential public services and stimulated aggregate demand but was constrained by fiscal deficits and high public debt. Net exports have played a significant role in shaping growth, particularly during periods of global economic fluctuations. However, Egypt’s heavy reliance on limited export commodities and its limited export competitiveness make it vulnerable to external shocks.The chapter concludes that Egypt’s economic growth was characterised by structural imbalances, with the service sector dominating and the industrial sector declining. This highlights the need for economic diversification, a more conducive investment climate, fiscal sustainability, enhanced export competitiveness, and social inclusion to foster more resilient, inclusive, and sustainable economic growth in the future. |
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