Egypt’s long-term trade prospects are mostly positive due to several reasons, according to HSBC’s Egypt Trade report.
Reasons mentioned in the report included potential infrastructure developments; recent natural gas discoveries; the support of the International Monetary Fund (IMF) to Egypt’s economic reform programme; and foreign investment from Asia. This comes despite current challenges, such as global economic uncertainty, high security risks, political turmoil, fiscal constraints, and rising inflation due to the liberalisation of the exchange rate.
In regards to exports, the report forecasts that petroleum exports will remain key to export growth, despite the forecasted decline in its contribution to total exports from 22% in 2015 to 16% in 2021-2030. The decline is attributed to the possibility of an increase in natural gas production as a result to Eni and BP offshore investments, leading to a potential boost in GDP and export growth while easing electricity constraints and reducing the country’s import requirements.
Furthermore, the export of animal products are projected to contribute to 11% of the rise in exports between 2021-2030, while mineral manufacturing, chemicals, and plastics are forecasted to decline in terms of contributions to export growth in the same period.
Egypt’s top three export destinations are expected to remain the same, with Saudi Arabia receiving 9% of total exports, and Turkey and the United Arab Emirates receiving 8% each. India at 7% is expected to overtake the United States, the report added.
Meanwhile, the fastest growing destinations for Egyptian exports in 2021-2030 are China, India, and Bangladesh. China is expected to increase imports from Egypt by 12% annually, while Bangladesh and India will both increase by 11% annually.
China is projected to become the largest importer of Egyptian animal products in this period, while Bangladesh will become the largest importer of Egyptian petroleum products. Vietnam is expected to become the largest importer of Egyptian plastics, minerals, and industrial machinery.
On the other hand, since 2015 high levels of expenditure on wages and subsidies limited the rise in capital spending by the government, but this is projected to change following the consolidation under the IMF programme, allowing the government to lift capital expenditure.
As a result industrial machinery is expected to become an essential catalyst of import growth, contributing 16% to the rise in total imported goods in 2021-30.
Egypt’s services exports, which are predominantly driven by transport and tourism, are expected to run a deficit in 2016 mainly due to a decline in tourism and Suez Canal revenues. Transport and tourism account for 52% and 33% of the total services exports respectively.
However, the currency devaluation is expected to help in the recovery of service exports by making Egypt a more competitive destination for tourists and shipping.