Our comprehensive assessment of Egypt's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Egypt, as well as the latest industry developments that could impact Egypt's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Egypt before your competitors.

Country Risk

Egypt Country Risk

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Core Views

  • One the whole, 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...

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Egypt Operational Risk Coverage (9)

Egypt Operational Risk

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Investors face numerous risks in Egypt across almost every segment of our operational risk rankings. The country benefits from a relatively good supply chain network and trade infrastructure. In addition, Egypt has the largest population in the Arab world, is situated between Europe, Asia and Africa and its high rate of urbanisation is also attractive to investors. However, the country has a strong union presence, a significant risk of terrorist attack and an education system which falls short of supplying adequately skilled graduates for the labour market.

Egypt receives a low score for almost every component of our operational risk index. While there are some positives regarding the breadth of education and a low crime rate, there a plethora of risks including the lack of relevant skills set within the population, high unemployment and trade barriers. We also highlight risks from a unionised and overregulated workforce, and limited...

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Egypt Crime & Security

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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.

Interstate conflict is the least probable security risk facing Egypt. The country is the Middle East's leading military power, meaning that it has the means to repel any hypothetical invader. Moreover, territorial disputes between Egypt and its neighbours are relatively minor and unlikely to become a flashpoint. Egypt's importance also means that most countries have a vested...

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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 36.1 out of 100 in our Operational Risk Index. This places the country in 15 th place in the Middle East and North Africa (MENA), between Algeria and Iraq (which have scores of 38.0 and 35.8 respectively), and 33.3 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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One of the greatest risks for businesses and investors in Egypt is the relatively limited bureaucracy surrounding trade. This is countered by the country's well developed infrastructure for trade. Egypt ranks in line with its regional peers in the Middle East and North Africa region for our proprietary logistics ratings. The country scores 56.7 out of 100 which places it above most states in North Africa and the Levant, but below Israel and those in the Gulf, the latter two being consistent outperformers across most indicators.

In terms of utilities, Egypt provides relatively cheap fuel and electricity, as well as extensive cellular phone coverage. Owing to subsidies on fossil fuels, pump prices and electricity costs are much lower than the global average, which partly justifies Egypt's Utilities Costs and Availability score of 58.3 out of 100. Egypt remains heavily reliant on imports of energy resources and water and disruptions to either of...

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Egypt Trade & Investment

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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 of late, which should continue once a new government and parliament is elected in H214.We have awarded Egypt a score of 38.5 for Trade And Investment Risk.

This places the country in 14 th place out of 18 in the region, between Morocco and Algeria, and 116 th globally. Egypt's low score on a regional and global level is due in part to low figures for investment openness and the rule of law. For the former, Egypt's poor infrastructure and convoluted, over-regulated labour market is an unattractive proposition, deterring potential foreign direct investment (FDI). In addition, the market is relatively closed to...

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Egypt Industry Coverage (23)

Agribusiness

Egypt Agribusiness

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BMI View: Egypt remains the world's largest wheat importer, meaning that the recent sell-off in grain prices will benefit the country, though low prices will be limited by Egypt's weak pound and low foreign reserves. The country is in the process of reforming its food subsidy programme, in an effort to make the process more efficient. The sugar industry is benefiting from a tight local ma rket and higher domestic prices, and we believe the livestock and dairy industries will continue to recove r strongly from the recent foot-and-mouth disease outbreak, especially in a context of lower grain prices.

Agribusiness Market Value
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Autos

Egypt Autos

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Conditions for Egypt's new vehicle market are much improved in 2014. With the political situation more stable and inflation heading lower, we are revising our forecast for passenger car sales upwards to growth of 25.0%. Although we had already expected a better year in 2014, this is a significant revision from our previous forecast of 3% growth, made when the government was in a state of flux and policy was unclear.

Sales for Q114 have borne out this optimism, with total light vehicle sales up 23.0% year-on-year (y-o-y), with sales for March alone achieving 29.0% y-o-y growth. We expect base effects from 2013 to have even more impact in the coming months, as sales were particularly hard hit in the summer months of 2013, when unrest forced the temporary closure of some vehicle plants. As such we think growth will head higher over the remainder of the year.

There is also positive news in the motorcycle segment, where the...

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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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Following a slump in the consumer electronics market in 2013, owing to currency depreciation and a lack of access to credit on favourable terms, we forecast consumer electronics spending growth to recover from 2014. BMI has a positive medium term outlook for Egypt's consumer electronics market, with a young population, 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 devices such as smartphones and tablets. We expect total spending to increase at a CAGR of 7.9% 2014-2018, from USD3.1bn in 2014 to USD4.2bn in 2018.

Headline Expenditure Projections

Computer hardware sales: USD980mn in 2013 to USD1.1bn in 2014, up 8.9% in...

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Defence & Security

Egypt Defence & Security

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We expect Egypt's defence budget to reach USD5.4bn in 2014. We anticipate that it will increase to USD5.9bn in 2016 and then to USD6.5bn the following year. The final two years of our forecast period will see Egypt's defence budget increasing firstly to USD7.1bn in 2017 and then to USD7.6bn during 2018.

We have given Egypt an overall Security Risk rating of 59 for Q414. On average, Egypt has retained an overall Security Risk rating of 55 for the period December 2007 until Q414. Egypt faces a number of distinct security challenges. The country has a moderate risk of becoming involved in a major interstate conflict. Similarly, it has a moderate chance of experiencing a major terrorist attack along with the strong possibility that it is also likely to experience significant levels of criminal activity in the future.

In early June 2014, Egypt's former Chief of the General Staff and defence minister, Field Marshal Abdel...

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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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Political uncertainty will continue to affect the Egyptian economy in 2014 as the country continues through its rocky transitional period towards democracy. However, the election of former Field Marshall Sisi to the presidency following elections at the end of May 2014 will serve to reduce political risk and will introduce a measure of stability not seen since the ouster of President Mubarak in 2011. Sisi's election will provide a veneer of political legitimacy, thereby releasing US aid flows, and should help the economy get back on track. A recovering economy will be felt in the country's ports and airports and on its freight services, as consumer demand and investment into infrastructure picks up, thereby boosting container and dry and liquid bulk freight services.

Increased security would help in reviving tourism, and other industries, and serve to boost container volumes through Egypt's ports. Equally, should investment start flowing into...

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Information Technology

Egypt Information Technology

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BMI View: Egypt's fragile politi cal and economic environment is a drag on its IT market, limiting the country's ability to develop its full potential as a hub between the Middle East and Africa. Meanwhile, the impending reduction of finan cial support to Egypt from Gulf states will further weig h on growth over the short term. BMI nevertheless holds an optimistic outlook for Egypt's IT market in the later years of our forecast period , based on the...

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Infrastructure

Egypt Infrastructure

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BMI View:   We maintain our construction industry real growth forecast for Egypt at 4.5% in FY2014 and 5.3% in FY2015 on the back of a strong project pipeline, robust demand for infrastructure, and increased political stability. However, Egypt's limited access to private capital for infrastructure development will continue to reinforce the country's dependence on external loans and financial assistance from allies in the region.

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 coming quarters. Recent data shows a significant pickup over the past year. According to the Egyptian Central Bank, net FDI inflows came in at USD6.2bn in...

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Insurance

Egypt Insurance

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BMI View:   Overall, we anticipate that Egypt's insurance sector will enjoy steady growth over the forecast period. It should benefit from a period of stability, following political and economic volatility over the last few years. Challenges will continue to hinder the sector, particularly the non- life segment, as the central government attempts to reduce subsidies and high levels of debt. Moreover, we see little evidence of consolidation among non-life insurers, who will continue to achieve sub-prime profit due to extensive use of outwards re-insurance. Nevertheless, the market has shown itself to be remarkably resilient. In light of this, and regulatory changes, we may revise our forecasts upwards in the near future.

As of late-2014 premiums have recorded steady growth, despite continuing political...

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Medical Devices

Egypt Medical Devices

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Espicom Industry View:   The   Egypt ian 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 c apita medical device expenditure is low, which indicates the enormous potential for growth as the country has the second largest population in the region....

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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   are taking into account the influence of the weak Egyptian pound on the sector and whether depreciation is sufficient to compete in an over-supplied regional market. We expect the worsening political situation to weigh on growth.

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...

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Mining

Egypt Mining

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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 likelihood of 25%), it will be a game changer for the country's beleaguered mining...

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Oil & Gas

Egypt Oil & Gas

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BMI View: The installation of the el-Sisi government has improved investor sentiment in Egypt, which has been troubled by political and social instability. We anticipate a more stable environment for operators and investors over the coming years, though highlight uncertainties still persist. Our view has been supported by the positive news from smaller exploration and production companies in Egypt, which have stepped up operations. We expect this trend to continue with Egypt's strong below-ground potential too good to ignore.

We highlight the following trends and developments in Egypt's oil and gas sector:

  • Positive sentiment towards operating in Egypt is returning after years of political turmoil. Exploration and...

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Petrochemicals

Egypt Petrochemicals

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BMI View: The Egyptian petrochemicals industry is beginning to make tentative steps towards expansion in spite of lingering uncertainty under the interim government. While the risks are high, the local market's potential and the plentiful domestic supply of ethane still makes it an attractive place to invest in the long term.

A lack of fresh foreign investment could affect the start-up of new companies, and consequently the country's manufacturing sector and polyolefins demand. Meanwhile, the central bank's poor standing will also present difficulties for converters when they attempt to open letters of credit recognised by banks abroad, which are necessary to purchase PE and PP for import. Such difficulties could have the effect of supporting domestic production.

Over the past quarter,...

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Pharmaceuticals & Healthcare

Egypt Pharmaceuticals & Healthcare

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BMI View: The landslide victory by Abdel Fattah al-Sisi in the presidential election in Egypt increases the attractiveness of the country ' s pharmaceutical market, which has been deteriorating for the past few years. Key challenges facing multinational companies include a restrictive medicine pricing regime, a lack of regulatory data protection and poor patent enforcement. Domestic companies are meanwhile impaired by a weakened currency, which restricts their ability to import raw materials for manufacturing pharmaceuticals.

Headline Expenditure Projections

  • Pharmaceuticals: EGP14.34bn (USD2.09bn) in 2013 to EGP15.89bn (USD2.27bn) in 2014; +10.8% in local currency terms and 8.7% in US dollar terms. Forecast revised downwards ...

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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 to sector is likely to remain limited in the medium term. With power 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 tourism and transport), the expansion of Egypt's electricity infrastructure...

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Real Estate

Egypt Real Estate

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BMI View:   The real e state sector in Egypt remains in a state of flux in Q414, facing short-term stagnation as a result of political instability   despite the market's significant long-term potential. While we are witnessing some alleviation in the political and economic conditions that have plagued the sector in recent months, we do not expect the commercial real estate market to recover its previous dynamism any   time soon.

Egypt has long-term potential that is being undermined by the steady risk of instability, and the country will feel the effects of the Arab Spring in the short-to-...

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Retail

Egypt Retail

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BMI View: Egypt's huge and expanding population, together with increasing levels of disposable income, should result in a strong rise in household spending over the next few years, although the continuing political unrest could dent retail prospects. The Egyptian retail sector is set to continue to grow across all subsectors. We are particularly positive about the future growth prospects for the health, transport and education sectors, with communications also set to grow strongly; however, we expect the highest proportion of the household budget to be spent on food & drink throughout our forecast period, with housing & utilities spending also taking a substantial share.

The Egypt Retail report provides an extensive and comprehensive forecast of various retail indicators including household spending and headline total spending across each retail subsector, household income and...

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Shipping

Egypt Shipping

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Political uncertainty will continue to affect the Egyptian economy in 2014 as the country continues through its rocky transitional period towards democracy. However, the election of former field marshall Sisi to the presidency following elections at the end of May will serve to reduce political risk and will introduce a measure of stability not seen since the ouster of President Mubarak in 2011. His election will provide a veneer of political legitimacy, thereby releasing US aid flows, and should help the economy get back on track. A recovering economy will be felt in the country's ports and in its shipping services, as consumer demand and investment into infrastructure picks up, thereby boosting container and dry and liquid bulk shipping services.

Increased security would help in reviving tourism, and other industries, and serve to boost container volumes through Egypt's ports. Equally, should investment start flowing into the country once...

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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 licen c e 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   ...

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Tourism

Egypt Tourism

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BMI's Egypt tourism report examines the investment potential Egypt offers to large tourism-focused industries - particularly global hotel groups - as they seek to harness the growth opportunities offered by the local market over the long term. However, over the short term, political risk will continue to act as a clear suppressant to tourism demand.

Egypt's tourism sector remains in the doldrums. Latest available data from the Central Agency for Public Mobilisation and Statistics showed a 20% annual decline in arrivals in May 2014, to 768,221. Although this is slightly better than the 29.7% decline in arrivals seen over Q114, it still reflects years of political turmoil. For the year-to-date, the cumulative tourist arrivals figure stands at 3,641,921. Local media reports suggest that the H114 arrivals figure was around 4.4mn, down by around 25% year-on-year (y-o-y).

This quarter,...

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Water

Egypt Water

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BMI View: Egypt will predominantly follow the path taken by many MENA countries in looking to desalination for aid in alleviating potential water shortages . H owever as the desalination facilities are extremely costly, the country is likely to look for outside funding to assist in the development of its desalination sector. The government also aims to improv e the efficiency of its water infrastructure (reducing losses and improving network coverage) as well as improving overall water conservation .   H owever , we feel this process will take some time owing to the dearth of investment.

The...

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