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Egypt Index

By necessity if not by design, the revolutionary regime gave considerably greater priority to economic development than did the monarchy, and the economy has been a central government concern since then. While the economy grew steadily, it sometimes exhibited sharp fluctuations. Analysis of economic growth is further complicated by the difficulty in obtaining reliable statistics. Growth figures are often disputed, and economists contend that growth estimates may be grossly inaccurate because of the informal economy and workers' remittances, which may contribute as much as one-fourth of GNP (see Remittances , this ch.). According to one estimate, the gross domestic product (GDP--see Glossary), at 1965 constant prices, grew at an annual compound rate of about 4.2 percent between 1955 and 1975. This was about 1.7 times larger than the annual population growth rate of 2.5 percent in the same period. The period between 1967 and 1974, the final years of Gamal Abdul Nasser's presidency and the early part of Anwar as Sadat's, however, were lean years, with growth rates of only about 3.3 percent. The slowdown was caused by many factors, including agricultural and industrial stagnation and the costs of the June 1967 War. Investments, which were a crucial factor for the preceding growth, also nose-dived and recovered only in 1975 after the dramatic 1973 increase in oil prices.

Like most countries in the Middle East, Egypt partook of the oil boom and suffered the subsequent slump. Available figures suggest that between 1975 and 1980 the GDP (at 1980 prices) grew at an annual rate of more than 11 percent. This impressive achievement resulted, not from the contribution of manufacturing or agriculture, but from oil exports, remittances, foreign aid, and grants (see Balance of Payments and Main Sources of Foreign Exchange , this ch.). From the mid-1980s, the GDP growth slowed as a result of the 1985-86 crash in oil prices. In the two succeeding years, the GDP grew at no more than an annual rate of 2.9 percent. Of concern for the future was the decline of the fixed investment ratio from around 30 percent during most of the 1975-85 decade to 22 percent in 1987.

The post-World War II growth was accompanied by a certain degree of diversification of the economic structure, although not without serious flaws in the diversification (see table 3, Appendix). By 1952 agriculture's share of GDP at fiscal year (FY-- see Glossary) 1959 market prices was 33 percent, industry's (including mining and electricity) share reached 13 percent, and the service sectors' share amounted to 54 percent. The diversification resulted from the decline of agriculture's contribution to the GDP and the ascendancy of industry and, particularly, of government services. Agriculture's share in the GDP dropped by more than half from 1952, stabilizing near 15 percent through most of the 1980s. Industry's share moved in the opposite direction: from only 13 percent in 1952, it hovered around 35 percent in the 1980s.

Although the industrial sector's contribution to the GNP rose during this period, that growth was due to the increase in energyrelated activity, especially oil-drilling. Manufacturing stagnated and may even have declined. In 1974 (when data for the subsector became available), manufacturing accounted for 15 percent of GNP, but its share fell to 12 percent in 1986 and remained there in early 1990. The lackluster performance of manufacturing was one of the main reasons for the Egyptian economy's inability to become self-sustaining, and for its dependence on oil and external financing.

The services (including construction) held relatively steady, comprising around one-half of GDP, a figure that included the contributions of the various subsectors. An important subsector from a developmental viewpoint was the one entitled "other services"--mostly government services. These averaged 14.2 percent of the growth in GDP in the years from 1952 to 1959 and 32.7 percent of the growth in the years from 1959 to 1969. The increase resulted primarily from the expansion in the bureaucracy that followed the 1961 decree guaranteeing government jobs for all university graduates. The trend continued under Anwar as Sadat (1970-79), and slowed, or may have reversed under Husni Mubarak as the state became financially incapable of hiring the many new jobseeking graduates (see The Role of Government , this ch.). Although government employment may have encouraged economic growth temporarily, it impeded it over the long run, competing for scarce investment funds and exacerbating the trade deficit.

Data as of December 1990

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