The economy of Egypt

Racing against the Sea: Egypt's Economy Today and Tomorrow

The economy of Egypt will be influenced both by stark dangers and encouraging reforms in the coming months and years. The World Bank gives Egypt high marks for trade liberalisation measures and ongoing support of the private sector in its efforts to found new businesses and ventures. However, occurring in tandem, Egypt's agricultural revenue is threatened by the possible effects of climate change upon the vulnerable Nile Basin and its suitability for farming. Tourism, also a critical sector, is similarly vulnerable both to literal climate change and to the figurative 'climate' of global financial stormclouds and anaemic growth.

The region around the banks of the Nile River is the only land in Egypt which is arable naturally, without the need of manmade irrigation projects. Agriculture along the Nile is extremely important for Egypt's economy. According to U.S. Congressional Research Service reports, the Nile delta is one of those critical world regions that is vulnerable to rising sea levels due to global warming. The whole gamut of possible ill effects from rising sea levels fans out like a bad hand of cards. There could be large numbers of internally displaced Egyptians in search of a livelihood. There could be domestic unrest over competition for water resources.

Or, there could be unrest over food. Egypt relies upon Nile basin agriculture for its domestic food supply as well as for exports. Egypt subsidizes bread, and in 1977 when the Nasser government briefly lifted the subsidy, hundreds were killed in the January 'Bread Riots.' None of which makes Egypt look particularly attractive for investment - it may even be too cloudy for an accurate forecast.

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The picture for Egyptian tourism revenue is mixed for similar reasons. Egypt is unique in being a part of northern Africa with cultural ties to the Middle East. Close proximity to Europe makes it an attractive destination for tourists. The Sphinx, the Great Pyramids and the tomb of Tutankhamen are only the most famous of Egypt's many landmarks, and the immense amount of historical interest is a perennial tourist draw. However, the twin concerns of recession and climate change hang over tourism as they hang over farming.

Reports from the respected Intergovernmental Panel on Climate Change call out Alexandria as just one vivid illustration. With so many tourist attractions situated on or near Alexandria's beaches, the estimated loss of revenue from a half-meter rise in sea levels could be well over $100 million U.S. dollars a year, the report says. The attractiveness of coastal areas for ongoing real estate development remains a double-edged sword.

The bright spot for the economy may be that the Egyptian government appears willing to take looming problems seriously and address them. The many business and trade reforms have been undertaken out of a recognition that they are necessary for Egypt to attract foreign investment. In the wake of recession, the government has engaged in deficit spending in order to implement stimulus programs, provide income subsidies and attempt to ease the burden on Egyptians, especially the 9.7% who were unemployed in 2009. The willingness to act is encouraging (with a nod of acknowledgment towards the many economists who express worry at the long-term consequences of running deficits per se.)

The danger of climate change is also not lost on the Mubarak regime. Their response has been to initiate public works projects to apply drip irrigation to the desert and make new areas liveable and farmable. According to Deutsche Welle television reports, billions of Euros have been invested in the ambitious Toshka project. But the admirable effort by Egypt to do something concrete about a future economic disaster may be the roots of another one, as the disproportionate demand for water is creating tensions between Egypt and other Nile states such as Ethiopia.

On business and property development, fiscal policy and water, Egypt is making a concerted effort to improve the economy and the condition of the people. But the present and future Egyptian economy is going to depend upon which is more robust and which happens faster - the beneficial or the harmful trend lines.