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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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. In addition, Egypt 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 there are some positives regarding the...

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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 29.1 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 not specifically targeted or highly likely to...

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Egypt Labour Market

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BMI View: There are a plethora of labour market risks for investors 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 workforce. We give Egypt an overall Labour Market Risk score of 36.5 out of 100 in our Operational Risk Index. This places the country in 16th place out of 18 states in the Middle East and North Africa (MENA), between Algeria and Iraq.

The key risks to investors in terms of the availability of labour are with regard to the size of the overall labour force, with low employment figures and limited female employment. On the plus side, Egypt possesses high basic skills score, boosted by widespread literacy, and high levels of primary education. Egypt...

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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 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 the country 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 addition, the market is relatively closed to investors, which hinders the country's...

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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
BMI Market...

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Autos

Egypt Autos

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For H114, the passenger car market was up 30.0% year-on-year (y-o-y) and we are maintaining our forecast for 25.0% growth in car sales over the full year. There is potential for similarly high growth in Q3. This period in 2013 saw high political tensions, and the temporary closure of some production plants, which restricted supplies. The latter months of the year saw the market stabilise and this will reduce the stark base effects.

The commercial vehicle (CV) segment also enjoyed stellar sales growth in June with truck sales up 73.0% y-o-y and bus sales 43.0% higher y-o-y. This leaves H114 CV sales ahead of our initial expectations, with H1 truck sales up 36.0% y-o-y and bus sales up 24.0% y-o-y. We have revised up our full-year forecasts for light commercial vehicle sales growth from 7.0% to 18.0% and our bus sales growth forecast from 5.0% to 15.0%. Although we are optimistic for the CV segment based on recent strength in the market, we...

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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: C urrency depreciation and a lack of access to credit on favourable terms resulted in a dramatic slowdown in consumer electronics spending in 2013, but we forecast a recover y from 2014 as the economic environment stabilises.   BMI has 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...

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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:   we have a positive medium - term outlook for the development of Egypt's IT market, but in the short   term growth will continue to be held back by Egypt's fragile politi cal and economic environment . Additionally , the impending reduction of financial support to Egypt from Gulf states will further weigh on growth over the short term. However, over the medium term growth will be driven by trends such as the develop ment   of Egypt as a hub between the Middle East and Africa , the growth of 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 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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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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The expansion of the Egyptian petrochemicals industry is likely to go ahead, although delays are expected. Greater political stability under the new administration should bring about more clarity in the business environment and reduced risk over the medium-term, according to BMI's latest Egypt Petrochemicals Report.

Egypt's Minister of Petroleum Sherif Ismail said in Q214 that completion of many petrochemical projects in Egypt have been delayed owing to the paucity of natural gas supplies in Egypt. Domestic petrochemical projects that have been postponed include a USD2.2bn fertilizer complex in the industrial zone west of Damietta port, which is scheduled to have an annual production capacity of 2mn tonnes of urea, Ismail added. Other projects that have been delayed until Q115 include a USD408mn polystyrene complex in Dekheila port in Alexandria and a USD1.6bn ethylene and derivatives project in the Western Desert....

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Pharmaceuticals & Healthcare

Egypt Pharmaceuticals & Healthcare

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BMI View : Egypt's relative political stability will lead to a pickup in growth over the coming quarters, increasing the attractiveness of the pharmaceutical market - for which our forecast has been revised slightly upwards. The government's increased emphasis on developing the pharmaceutical sector and the announced expansion of the Medicare healthcare programme are positive developments this quarter. The challenges faced by pharmaceutical companies wishing to operate in the market are the continued presence of counterfeit medicines, poor patent enforcement and a lack of regulatory data protection.

Headline Expenditure Projections

  • Pharmaceuticals: EGP16.55bn (USD2.41bn) in 2013 to EGP17.64bn (...

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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...

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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 significant growth opportunities offered by the local market over the long term

Over the past quarter, there have been increasing signs that the worst may now be over for Egypt's beleaguered tourism sector, in line with BMI's long-held views on the subject. Indeed, the latest available data from the Central Agency for Public Mobilisation and Statistics (CAPMAS) as this report was being compiled showed a 15.8% annual rise in the number of tourists visiting Egypt over July 2014, to 885,765.

Greater political stability following the election of Abdel-Fattah el-Sisi as President in May is heralding a recovery in tourism arrivals, with local newspaper Al-Ahram estimating that 997,500 visitors arrived in...

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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 likely to stem from the Ethiopian Renaissance Dam project . 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 ,...

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