Egypt is a crucial market for many of our clients. Its economy is the third largest in the Arab world after Saudi Arabia and the UAE. The country has strong ties with the West and has played an important negotiating role in the Israel-Gaza conflict. Egypt's main export is crude petroleum and the country also boasts a thriving textiles industry. We ensure our clients make sound investment decisions in Egypt, using our risk-assessed total analysis model. Our teams keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective. Our expert views are supported by our interactive data and forecasting. We also provide in-depth analysis on 23 of Egypt's most important industries. Our analysts will make sure you, as our client, have the edge in Egypt.

Country Risk

Egypt Country Risk

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Core Views

  • 2015 will be a relatively positive year for the Egyptian economy, as the currency stabilises and investment returns to the county.

  • The fiscal and net export position will improve significantly on the back of fuel subsidy reform. Subsidy cuts will likely be watered down if public unrest occurs on a significant scale, however, the bulk of reform will remain in place.

  • Hikes to domestic energy prices will push consumer price inflation back into the double digits by the end of the year.

  • Egypt's geopolitical importance will ensure that even if an IMF agreement is delayed for longer than expected, further foreign aid commitments will materialise around the turn of the year. Western powers such as the US and EU have an interest in ensuring the North African country does not experience a more pronounced...

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Egypt Operational Risk Coverage (9)

Egypt Operational Risk

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BMI View: Investors face numerous risks in Egypt across almost every segment of our operational risk rankings. The country has a strong trade union presence, a significant risk of terrorist attacks, and an education system which falls short of supplying adequately skilled graduates for the labour market. In addition, the utilities network suffers from frequent shortages which disrupt business activity, and the business environment remains somewhat hostile to investment. On the positive side, Egypt benefits from good international supply chain connections and trade infrastructure. The country has the largest population in the Arab world, with rising incomes and a high rate of urbanisation, and therefore offers an increasingly attractive consumer market.

Egypt receives a low score for almost every component of our operational risk index. While...

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Egypt Crime & Security

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BMI View: Security and safety are not major concerns for businesses operating in Egypt, especially when compared with the rest of the Middle East and North Africa region. As with most major countries, Egypt experiences issues with petty crime; however, this varies across the country, with most crime occurring in Cairo and Alexandria, while the south is almost crime-free. That said, terrorist incidents have become increasingly common, and while they do not compare with attacks in other parts of the region, namely Iraq, Libya and Syria, terrorism is still a cause for concern. Egypt scores 28.9 out of 100 in our overall Crime and Security Risk Index, placing it 13th out of 18 Middle East and North Africa (MENA) states.

There is a generally low threat from crime in Egypt, and foreign workers and tourists in major cities are...

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Egypt Labour Market

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There are a plethora of labour risks in Egypt. Widespread poverty is present in the main cities of Alexandria and Cairo as well as in the South of the country, even though Egypt is relatively wealthy in aggregate. This results in significant income disparities and affects the composition and educational levels of the work force. We give Egypt an overall Labour Market Risk score of 39.7 out of 100 in our Operational Risk Index. This places the country 16 th in the Middle East and North Africa (MENA) region, between Syria and Morocco (which have scores of 42.4 and 38.5 respectively), and 29 points behind Israel, the regional leader.

Education risks are significant and appear to have worsened over the past two decades. While primary school is compulsory and free - leading to very high attendance rates - the quality varies substantially and Egypt is no longer the educational beacon of the Middle East that it once was. This presents...

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Egypt Logistics

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BMI View: Egypt's logistics network poses a number of key risks to business activity which will cool investor sentiment towards the country over the medium term. Of particular concern is the underdeveloped and overburdened utilities network, which results in shortages of electricity, fuel and water disrupting business operations. In addition, the poor quality of alternative transport options means that supply chains are subject to frequent delays due to their reliance on the congested road network. These logistics shortcomings threaten to hinder Egypt's economic growth, which is beginning to recover following the prolonged unrest since 2011. The main advantages for investors are to be found in extensive maritime and air trade connections, which reduce trading times and costs. Egypt is placed in the middle of the pack in the Middle East and North Africa (MENA) region in our overall Logistics Risk Index, in eighth place...

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Egypt Trade & Investment

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BMI View: Egypt is one of the less attractive destinations for trade and investment in the Middle East and North Africa (MENA) region. The country lacks a well defined and implemented legislative environment, and has relatively weak intellectual property rights. That said, there have been some improvements on this front as of late, which should continue once President Sisi's administration is firmly established. We have awarded Egypt a score of 38.5 out of 100 for the overall BMI Trade And Investment Risk Index, placing it 12th out of 18 states in the Middle East and North Africa (MENA) region.

Egypt's poor infrastructure and convoluted, over-regulated labour market is an unattractive proposition, deterring potential foreign direct investment (FDI). In...

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Egypt Industry Coverage (23)

Agribusiness

Egypt Agribusiness

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BMI View:  Egypt is the world's largest wheat importer and will benefit from the recent sell-off in grain prices. The country is in the process of reforming its food subsidy programme in an effort to make the process more efficient. We believe that particularly good growth prospects exist in the country's livestock and dairy industries, as cattle herds continue to recover from a foot and mouth outbreak in 2012. These sectors will also benefit from lower global grain prices relative to the last several years, and an improving domestic economic situation.

Agribusiness Market Value
BMI Market Value By Commodity (2010-2018)
...

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Autos

Egypt Autos

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In 2015, economic and political conditions will be even more supportive of sales growth and increased foreign investment in the sector, which will also buoy the production segment. Given the incredibly high base of 2014, we do not expect the same levels of growth, but still expect solid double-digit growth of 15% for cars and 10% for light trucks. With the heavier commercial vehicle market set to benefit from improving business sentiment and the bus market receiving a boost from both the government's scheme to replace older buses and an uptick in the pivotal tourism sector, we see the total new vehicle market growing by 13.3% in 2015.

A lower price environment and our forecast for a stabilisation of the pound means that it will also become more possible to see balanced growth in the light vehicle segment, whereas we saw smaller more fuel-efficient cars outperforming as the pound depreciated. Indeed, this was already starting to manifest...

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Commercial Banking

Egypt Commercial Banking

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...
Commercial Banking Sector Indicators 
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Egypt Consumer Electronics

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BMI View: The Egyptian consumer electronics market began to recover in 2014 from currency depreciation and a lack of access to credit on favourable terms resulted in a dramatic slowdown in consumer electronics spending in 2013. We expect the recovery to continue in 2015 and we have a positive medium-term outlook for Egypt's consumer electronics market, with a young population, low device penetration rates, rising incomes and the falling cost of devices to drive growth. We expect government, vendor and operator-led investment in supporting infrastructure such as telecoms networks and retail/distribution networks to further encourage growth and drive accelerating demand for connected...

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Defence & Security

Egypt Defence & Security

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BMI View:   At the end of 2014, security issues for Egypt both at the domestic and regional level continue to be of major concern. The BMI view is that Egypt's violent crack on all forms of political opposition risks pushing more and more young people - a key segment of the population - towards adopting extremist views in the long term. As the military seeks to continue strengthening its grip on power, we are expecting defence spending to increase both in absolute and relative terms in 2015.

Demonstrations amongst Egyptian youths continue in the Nile Delta, which we suspect has the potential to be the Achilles heel of the al-Sisi's regime. The collective punishment of entire communities in the Sinai also places the army at risk of losing the battle of hearts and minds...

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Food & Drink

Egypt Food & Drink

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Egypt is re-establishing its position as the standout growth market for consumer companies in the Middle East and North Africa (MENA) region and we believe this is a good time for food and drink companies to actively pursue expansion in Egypt, be it organically or via acquisitions. The pace of real GDP growth will pick up markedly over the coming years, helped by greater political stability and low base effects.

Our view on the improving outlook for the economy, combined with an improving political scene, is being reflected by increased interest from multinational food and drink companies. In March 2014, The Coca-Cola Company (TCCC) announced that it will invest USD500mn into Egypt. This investment will be used to not only increase production capacity for the sizeable domestic population, but also to develop Egypt's role as a regional hub for MENA. Similarly, Saudi Arabia's Aujan Coca-Cola Beverages Company announced in February that it plans...

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Freight Transport

Egypt Freight Transport

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Ongoing improvement in Egypt's political situation, with the election of President Sisi having brought in a level of stability not seen since 2011, will see the Egyptian freight transport sector enjoy continued expansion in 2015. While this will not be spectacular, we expect positive growth in volumes across all freight modes, supported by an improving consumer outlook, a recovery in the tourism sector, and increased construction. Crucially, the outlook is not only brighter for the near term, with significant investment into transport infrastructure ensuring continued growth over future years.

Headline Industry Data

  • Air freight handled at Cairo International Airport is set...

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Information Technology

Egypt Information Technology

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BMI View: A combination of a more stable domestic political and economic environment, combined with a supportive policy environment, underpins our positive medium-term outlook for the development of Egypt's IT market. However, in the short term downside risk remains due to Egypt's fragile political and economic environment. Additionally, the potential reduction of financial support to Egypt from Gulf states could weigh on growth over the short term. However, over the medium term growth will be...

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Infrastructure

Egypt Infrastructure

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BMI View: We have upwardly revised our construction industry forecast real growth for Egypt in 2015 and 2016 to reflect the expansion of the Suez Canal - we now forecast 8.2% and 7.2% real growth, respectively. Our medium-to-longer term outlook remains positive in light of increased political stability, a strong project pipeline, and robust demand for infrastructure.

Foreign direct investment (FDI) as well as development assistance are critical to Egypt's infrastructure development. As political stability and policy clarity, as well as pent-up demand, entice investors back into the country, our Country Risk team expects a significant upswing in FDI inflows into Egypt over the...

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Insurance

Egypt Insurance

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BMI View:  It may well be that 2014 is seen as a landmark year in which Egypt's resilient insurance sector moved decisively onto a trajectory of high annual growth in premiums. The inconvenient ban on bancassurance came to an end at the beginning of 2014. The regulator has clearly indicated its intention to promote a number of positive reforms. These reforms include a major modernisation of the laws governing the insurance sector in Egypt and the possible introduction of compulsory lines (e.g. for expatriate Egyptians). The insurers themselves have been innovative, developing products that relate to the political violence that has been widespread. Takaful appears to be growing rapidly, albeit from a very low base.

The massive expansion of the capacity of the Suez Canal, which has been funded by the successful issuance of...

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Medical Devices

Egypt Medical Devices

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BMI Industry View: The Egyptian medical device market is fairly small compared to other countries in the Middle East and Africa (MEA) region but it is projected to register one of the fastest 2013-2018 CAGRs in the region. Per capita medical device expenditure is low, which indicates the enormous potential for growth as the country has the second largest population in the region. As production is relatively...

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Metals

Egypt Metals

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BMI View: We forecast modest growth in the Egyptian steel sector over the coming years, in line with our outlook for the wider economy. We expect the political situation to continue to show exhibit greater stability over the coming quarters and for stabilisation in the Egyptian pound.

We  remain positive about the effects of Egypt's transition towards a democratic government, as investors will begin to look more favourably towards the country as a potential market to work with. We have seen these positive effects on the country are already beginning to show. For 2014, we forecast steady Egyptian steel production growth on the back of greater investment in expanding production capacity and more stability in the country following the 2013 ouster of the Muslim Brotherhood, as well as greater investment pouring in from Gulf...

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Mining

Egypt Mining

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BMI View:  We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a...

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Oil & Gas

Egypt Oil & Gas

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BMI View: Investor sentiment in Egypt has significantly improved as political stability returns and the government begins repayments owed to oil companies. We forecast upside for investment and production in natural gas projects, though note fuels subsidies continue to disincentivise investment in the downstream.

Headline Forecasts (Egypt 2012-2018)
2012 2013 2014f ...

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Petrochemicals

Egypt Petrochemicals

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BMI View: Putting its troubles behind it, Egypt is advancing its petrochemicals development which should ensure self-sufficiency, but the country remains plagued by its energy crisis, according to BMI's latest Egypt Petrochemicals Report.

Capacity is due to ramp up in 2015 with Egyptian Ethylene and Derivatives Company (Ethydco) planning to commission an olefins facility with capacities of 460,000 tonnes per annum (tpa) ethylene and 20,000tpa butadiene, which should feed the ENPPI PE plant. Sidpec already operates the country's only ethylene plant, a 300,000tpa cracker at El Ameriya, which feeds its LLDPE and HDPE units.

However, gas shortages are plaguing the sector and the wider economy. Egypt needs around 500,000tpa of ethylene in order to sustain downstream production, but in 2014 local production was well below this...

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Pharmaceuticals & Healthcare

Egypt Pharmaceuticals & Healthcare

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BMI View: Recent developments have led us to hold a more positive outlook for Egypt's pharmaceutical and healthcare markets. An increased healthcare budget for 2015, combined with the government's efforts at developing the local manufacturing industry and combating medicine shortages and counterfeit drugs are all positive developments. We expect Egypt's relative political stability and positive economic outlook to further increase interest from foreign pharmaceutical companies.

Headline Expenditure Projections

  • Pharmaceuticals: EGP16.55bn (USD2.41bn) in...

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Power

Egypt Power

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BMI View: Egypt is in desperate need of increased power capacity, as the country's energy infrastructure struggles to cope with the demand for power. However, with the political situation still in a state of flux and the economic outlook remaining poor, Egypt's ability to channel investment towards the sector is likely to remain limited in the medium term. With electricity remaining a hot political issue, the government is likely to concentrate its efforts on reforming its elaborate system of energy subsidies, which in addition to pushing up demand for energy has had a deleterious impact on government finances.

Egypt's power sector is enduring a challenging period. With economic growth hinging on the provision of adequate and reliable power to vital sectors (ranging from industry and agriculture to...

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Real Estate

Egypt Real Estate

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BMI View:   Egypt is only just beginning to recover from the political instability seen in the country over the previous three years. On top of this, regional violence and strife have added a further deterrent to would be investors. Instability is also keeping away tourists, negating one of the most powerful drivers of the Egyptian economy. Nevertheless, holding an important position within regional culture and with demographic trends on its side, the country's economy continues to move forward, and there are many signs that the real estate market may be turning a corner.

Political upheaval, first the overthrow of long-time dictator Hosni Mubarak in 2011, followed by the removal of the democratically elected president Mohamed Morsi, has led to economic stagnation and flight of foreign capital. In recent quarters the...

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Retail

Egypt Retail

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BMI View:  A doubling of the number of households falling into the USD10,000-plus income bracket - important for retail sales - will mitigate the effect of tepid growth in household consumption over our forecast period. Although we expect the highest proportion of the household budget to be spent on food & drink between 2015 and 2018, subsectors such as communications, furnishing & home and clothing & footwear will grow strongly, providing opportunities for domestic and international retailers alike.

The Egypt Retail report provides an extensive and comprehensive forecast of various retail indicators including household...

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Shipping

Egypt Shipping

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The outlook for the Egyptian shipping sector is positive and we forecast a period of growth across the country's ports. The political situation in the country is quiescent following the election of Field Marshall Sisi to the presidency in 2014 and we expect investment to begin to flow into the country once more. Fundamentally, strikes at the country's ports have diminished, and a number of expansions are under way once more. The country benefits from the presence of the Suez Canal, and a recovery in Europe's developed markets - albeit a sluggish one - will see volumes through the waterway grow, delivering a boost to Egyptian container-handling facilities near the channel such as East Port Said.

Headline Industry Data

  • 2015 total tonnage throughput at el-Dekheila is forecast to grow by 1.4% to 26.06mn tonnes, and to average 2.0% per annum...

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Telecommunications

Egypt Telecommunications

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BMI View: Egypt's telecoms market is poised for a new phase of competition following the award of a mobile virtual network operator licence to wireline incumbent operator Telecom Egypt. We expect Telecom Egypt's entry into the mobile market to boost the Egyptian mobile market, which posted considerably slower growth in 2013 than in 2012, as the company is expected to target the low-end of the market. However, steepened competition is likely to result in further downward pressure on ARPUs, which, compounded with Egypt's fragile political and economic situation, may dampen operators' willingness to invest in much needed network development. Over the long term, though, BMI believes mobile operators Mobinil, Vodacom and Etisalat may use unified licenses to offer converged telecoms services for business and residential customers.

...

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Tourism

Egypt Tourism

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BMI View : 2015 should see the continuing recovery of Egypt's tourism market. Following a disappointing last few years, where political turmoil and fear of political violence have deterred tourists from visiting the country, we are starting to see a turnaround enabling the market to recover. The situation remains fragile, however, with the consumers and businesses waiting to see if political stability can be sustained.

Europe remains Egypt's largest source market, accounting for around 62% of total tourist arrivals the country, while Russia remains the biggest single source market, with over 1.7mn tourists expected to travel to Egypt in 2015. The downside risk to our forecast comes...

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Water

Egypt Water

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BMI View: This quarter has seen the extensive upgrading of our water sector forecasts for Egypt, which now include mains and sewage network connectivity, desalinated water production, non mains consumption and treated wastewater forecasts. We have also revised our existing forecasts to take the new data into account. Overall, we believe that the political recovery, and influx of financial support and foreign investment from various sources including the UAE and the US, will improve the country's economy, and increased stability will encourage sustained water infrastructure investment. Given the ongoing risks of reduced water availability due to the Ethiopian dam plans, we view the additional investment as crucial to boosting Egypt's water resources over the medium term.

The election of President Abdel Fattah al-Sisi has been positive for Egypt's infrastructure development and the country's...

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