The Egyptian economy is expected to pick up from 2014 to 2016 influenced by real export growth, according to HSBC’s latest Global Connections Trade Forecast Report.
“Real export growth is expected to gradually recover in 2014 after two years of significant weakness, reflecting improved political stability, the benefit of inflows of Gulf aid, as well as a bounce-back from a low base,” HSBC reported.
In the next six months, Europe will be the most promising region for trade, according to the report.
Last week, the Ministry Industry and Foreign Trade announced plans to establish a Russian industrial zone focused on producing agriculture machinery and in Egypt.
The Russian government has approved the Egyptian government’s proposal to begin negotiations regarding the establishment of a free trade zone between Egypt and the countries of the Customs Union, which include Russia, Belarus and Kazakhstan. Negotiations will start in July, the ministry reported.
Mounir Fakhry Abdel Nour, interim Minister of Industry and Foreign Trade, visited London this month to promote the ministry’s prospect projects.
Discussing the medium-term potential, HSBC concluded that exports will grow in the petroleum products, mineral manufactures and chemical sectors.
HSBC said it is optimistic about the country’s long-term growth opportunities “provided the political situation does not deteriorate again”.
According to the bank, the export of high-tech products and goods are very low – around 4% of the total merchandise exports – reflecting the country’s low economic development. HSBC attributed the slow growth to the country’s under investment in research and education, along with the continuous emigration of domestic talent to other countries.
“High tech goods imports is also relatively low at just under 7%, reflecting the relatively low GDP per capita of the country and therefore low demand for consumer high-tech,” the report said.
HSBC also argued that there is “a big assumption and there are doubts whether the country will invest sufficiently to drive export growth and in particular to enable high-tech exports to grow well in excess of total merchandise exports.”
The bank forecasted the share of the high-tech export to reach 5% by 2030.
“Egypt is a major trading partner for several countries around the world because of its key strategic geographical location,” said Mona El Sayed, head of commercial banking at HSBC Bank Egypt. “We are regularly seeing businesses in Egypt actively seeking to seize these opportunities for trade.”
As a result, she said, “We note that Egyptian exports and imports achieved an increase of 10.8% and 4.2% respectively in 2013. As highlighted by the latest HSBC Trade Forecast Report, we expect this modest growth to continue in the medium term.”
Egyptian business should continue pursuing across borders trade to grow on an international scale and help the economy, El Sayed said.
By 2030, the report expects India to maintain its first position in the Egyptian top export destination list, followed by Turkey and Saudi Arabia. China and the United States of America will take the fourth and fifth place, respectively.
“On a bilateral basis, over the period 2021-2030 Egypt’s fastest-growing export destinations will all be Asian countries,” the report read. “Exports to China, India and Malaysia will each be growing at double-digit rates over this period.”
Some experts have predicted that the economy will improve if former defence minister Abdel Fattah Al-Sisi becomes the next Egyptian president. But Bank of America Merrill Lynch said in its latest report that Egypt’s macro economy needs “more than just a president”.
Merrill Lynch indicated that a presidential bid by General Al-Sisi would be “market-friendly” in the near future; however, assistance from the Gulf Cooperation Council and the International Monetary Fund will still be needed for maintain macro stability during the second half of 2014.
Al-Sisi announced his intentions to run for president Wednesday after he resigned from his position as head of Egypt’s armed forces and defence minister. In his speech, Al-Sisi described the Egyptian economy as weak, adding that the country is experiencing “monumental challenges”.