Prior to 2001, Egypt's GDP grew fairly consistently for two decades. For example, during the 1980s, GDP grew at an average rate of 5.4 percent per year. As a result, Egypt's total GDP more than tripled from U.S. $23 billion in 1980 to over $71 billion in 1998. Between 1990 and 2001, Egypt's GDP growth averaged a respectable 4.5 percent.
Unfortunately, much of Egypt still suffers from poverty and high unemployment despite efforts to expand the economy. Egypt is struggling to keep pace with the world economy and for several decades Egypt has imported more than it exports. For example, in 1997 exports were $16.2 billion while imports were valued at $18.3 billion. Egyptian officials in late 2003 and early 2004 proposed new privatization and customs reform measures, but the government is likely to pursue these initiatives cautiously and gradually to avoid a public backlash over potential inflation or layoffs associated with the reforms.
On the bright side, income distribution is not badly skewed. The lowest 40 percent of households earn 21 percent of household income and the upper 20 percent of the population earns 41.1 percent of household income. The Egyptian government has done an adequate job of providing its population with access to clean drinking water, and to basic health care and to education.
Monetary pressures on an overvalued Egyptian pound led the government to float the currency in January 2003, leading to a sharp drop in its value and consequent inflationary pressure. The existence of a black market for hard currency is evidence that the government continues to influence the official exchange rate offered in banks. In September 2003, Egyptian officials increased subsidies on basic foodstuffs, helping to calm a frustrated public but widening an already deep budget deficit.
Egypt's balance-of-payments position was not hurt by the war in Iraq in 2003, as tourism and Suez Canal revenues fared well. The develop...