The global economy remains trapped in a cycle of slow economic growth and diminishing international trade growth. The world gross product (WGP) has increased by an average annual rate of 2.5% only since 2012, compared to 3.4% annual growth rate witnessed prior to the Great Recession of 2009, according to the United Nations (UN) World Economic Situation and Prospects 2017 report.
The report added that 2016 had witnessed the lowest growth in both WGP and world trade.
The report cites that the main factors behind the extended sluggishness in the global economy were the widespread slowdown of productivity growth, weak investment, low wage growth, low inflation, and rising debt levels, in addition to conflict and geopolitical tensions which continued to weigh on economic prospects in several regions.
In Egypt’s case, according to the World Economic Forum’s (WEF) Inclusive Growth and Development 2017 report, the country struggles from many aspects of inclusive growth. Since 2012, its GDP per capita and labour productivity have barely grown. Moreover, income and wealth inequality remain high, in addition to high unemployment rates, especially among the young, which in turn led to an increase in the dependency ratio, meaning that more and more people who are not in the workforce need to be supported by ever fewer workers. Egypt also suffers from an extremely high debt-to-GDP ratio and high carbon intensity of GDP, placing the future at risk.
Moreover, Egypt ranked 73rd out of the 79 countries listed, with an expected 2.55 growth score, 2.50 inclusion score, and 3.76 international equity score. The framework indicates that the rank is due to Egypt’s lack of education quality in addition to the fact that it does not reach a sufficient proportion of the population. Business and job creation remain constrained due to insufficient finance, poor transport infrastructure, and pervasive corruption, according to the WEF report.
On the other hand, the UN projects that growth in North Africa is projected to increase to 3.5% in 2017, dependent on a gradual improvement in the security situation. Security threats and social unrest weighed on investor sentiments and adversely affected the sub-region’s vital tourism industry, particularly in Egypt and Tunisia. In Egypt, the sharp decline in tourism revenues contributed to a severe foreign currency crisis. This prompted the Central Bank of Egypt to float the Egyptian pound leading it to lose more than 60% of its value against the US dollar.
The UN report concludes that substantial progress on reform measures is required to address the economy’s structural weaknesses in the wake of declining monetary and fiscal policy. This comes in addition to policy adjustments to provide incentives for foreign direct investments in value-added industries to promote job creation and resolve the double-digit unemployment rates.