Egyptian economy experiencing inflationary recession
A recent report published in the Egyptian capital Cairo reveals that the local economy is experiencing what it described as inflationary recession in the post-January 25 revolution. As a result unemployment rose from 9.1% last year to 11.9% in the first quarter of this year.
The report, prepared by the former Minister of Economy Sultan Abu Ali and part of a series of research papers published by the Information and Decision Support Centre in Egypt, showed a decline in production capacities and an increase in the number of company bankruptcies . It also noted a rise in the rate of inflation and forecasted a greater increase as the Egyptian Pound declines in value.
The study affirmed that a political package composing financial, monetary, trade and other policies is needed to deal with the situation in a balanced fashion.
Reforming the imbalance in wage and income distribution is imperative, but it will take time to implement comprehensive reform, the report said. Resolutions must therefore be issued immediately to deal with the current state of affairs and amend the policy when the need arises.
The study proposed a minimum wage of nothing less than the national poverty line and no more than 50% of the national monthly average, with a maximum wage of no more than 25 times that figure. It also suggested pegging wages to prices and productivity.
The Egyptian pound should be devalued very slightly against the dollar to prevent the balance of payments deteriorating or for the country’s international reserves to be eaten away should pressure increase on foreign currencies, the report recommended. (Source: www.yallafinance.com)
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