The Egyptian Economy is in a tough spot at present, and property is caught right in the center. Indeed, the nation’s property sector has the unenviable role of both suffering from and helping to drive the current situation.
The situation has been one of more-or-less continuous slowdown since 2011’s revolution. This, in combination with other factors such as the worldwide difficulties that have been in place since the global financial crisis hit in 2008, have left the country with shortages of foreign currency, rising levels of unemployment, and a prolonged period of general recession. Low growth and high levels of public debt seem to be hallmarks of Egypt’s economy right now, with cheap credit and aid payments from Gulf countries becoming an ever greater point of dependency.
2014’s election of President Abdel Fattah el-Sisi raised great hopes for the potential recovery of the Egyptian economy. The new President assumed power with some very grand and large-scale plans to get his country growing again, and these plans centered on large amounts of activity in a number of key sectors. Property was prominent among these sectors, along with other industries that play a major role in Egypt’s economy such as energy and tourism.
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While the plans seemed sound and many experts hailed them as the potential heralds of a new era for Egypt’s economy, a string of fresh setbacks have severely hampered them and prevented any recovery from taking effect so far. With oil making up 40% of all Egyptian exports, plummeting oil prices hit the country hard. One of the biggest markets for Egypt’s non-oil exports is the EU, so the continued struggle of the Eurozone also means tough times for Egypt.
One of the biggest things holding back the Egyptian economy right now is the lack of foreign currency. Following the revolution in January 2011, foreign reserves fell from US$35 billion to under US$15 billion by December 2012. Many of el-Sisi’s plans for the economy were designed to kick-start foreign direct investment on a grand scale, overcoming this problem and allowing a situation that would otherwise be virtually a contradiction – growing an ailing economy while decreasing the deficit. Huge-scale property projects played a major role in these plans, with property being a major source of foreign investment for Egypt.
Major projects were planned, including the construction of an entire new city from scratch, and equally major international conferences have been held to showcase the scale of el-Sisi’s ambitions to investors from around the world and attract funds. Such conferences, for instance a huge showcase of investment opportunities in property, energy, and tourism recently held in March at the luxury resort of Sharm el-Sheikh, initially looked promising. However, the continued appearance of new setbacks for the economy have sadly kept these events from fulfilling their potential when it comes to translating into real, foreign-currency investment for the Egyptian economy.
The situation this has brought Egypt to now seems to be something of a vicious circle. Lack of foreign reserves is impeding economic growth, and the continued weakness of the economy despite grand plans is putting off international investors and preventing the injection of new funds. It is, at best, difficult to say how long it will take before this situation can be escaped, and it is possible the recession will deepen before it improves.