Time for a Sisi-meter? Sisi declares his ambitions for the Egyptian economy
Presidential candidate Abdel Fattah Al-Sisi’s platform stated that he will target a 7% growth in GDP and a decrease in the unemployment rate to 8% by the fiscal year (FY) 2017/2018.
The presidential candidate announced his platform on his official website on Tuesday. The platform has been removed hours after it had been posted on the website.
During the first quarter of FY 2013/2014, GDP grew by just 1%. Current interim Minister of Finance Hany Kadry Dimian previously announced that he expected growth during FY 2013/2014 to range between 2% to 2.5%. In March, Minister of Planning Ashraf El-Araby announced that the interim government aims to increase gross domestic product by 3% to 3.4% during the next fiscal year.
Discussing the changes in fiscal policies, Al-Sisi’s economic platform stated that budget deficit and public debt should return to “safe levels”.
The presidential candidate aims to decrease the budget deficit to 8.5% by FY 2017/2018. The economic electoral platform added that it aims to lower public debt to 74.5% of GDP by FY 2017/2018.
Former economic analyst at CI Capital and economic expert Alia Mamdouh stated that achieving a 7% GDP growth rate in three years would require “a 25% annual increase in the volume of investments”.
Mamdouh added that with the current challenges the country is facing, achieving this goal would be “extremely difficult”.
She stated that the presidential candidate is “betting on the Gulf money [for investment] which will pour in the coutnry after the he [Al-Sisi] wins the presidential elections, especially from the United Arab Emirates and the Kingdom of Saudi Arabia”.
Cairo University economy professor Alia El-Mahdy stated: “This target is achievable but the mission will not be easy,” adding that current foreign direct investment represents less than 14% of the GDP.
Foreign direct investment has registered $2.8bn during the first half of FY 2023/2014, compared to $3bn recorded during the previous year.
She pointed out that a 7% or 8% growth rate in GDP does not necessarily reflect on the unemployment rates.
According to the Central Agency for Mobilisation and Statistics (CAPMAS), the unemployment rate registered 13.4% in the first quarter (Q1) of 2014 compared to 13.2% in the same period last year, marking a 0.2% year on year increase.
Mamdouh stated that the unofficial unemployment rate is around 20%, however. “Improving that rate would require no less than five years,” she added.
“When the cabinet of Ahmed Nazif [former prime minister who served in Hosni Mubarak’s regime between 2044 and 2011] took reigns of the country, the GDP growth rate was 3.5% and it reached 7% after three years while the unemployment rate reached 9%,” El-Mahdy said, adding that the “[economic] starting point of that government was better, so this means that lowering the unemployment rate by 5% in three years is extremely difficult”.
The electoral platform also discussed changes to monetary policy; the first stage, it said, will be to realise a surplus on the balance of payments, “in order to ease the pressure on the international foreign reserves”.
The second change, the platform said, would be to increase international foreign reserves, which would “allow the country to deal with emergency crises”.
Fakhry El-Fiky, Economics Professor and former assistant to the International Monetary Fund’s (IMF) executive director, said that Al-Sisi’s electoral platform requires “huge funds”, adding that the economic plan’s success relies mainly on the “availability of finances and the cooperation of government institutions”.
The economic expert added: “Al-Sisi stated that he needs EGP 1tn ($140 billion) to implement this economic platform; so in order to get that source of financing, he would need to restore political stability first”.
El-Fiky pointed out that the former Minister of Defence will rely on Egyptian businessmen to collect that money.
He stated that, “following Al-Sisi’s win”, the Gulf will match the amount pledged to Egypt following the ousting of Egyptian president Mohamed Morsi, which amounted to some $16bn in the form of loans and grants.
The platform also promised that several changes would be made to the taxation system, including: the transition from sales taxes to added value taxes, application of a real estate tax law and the settlement and collection of tax arrears.
The changes to the taxation system, according to Al-Sisi’s platform, aim to broaden the tax base to include informal businesses, which will be “encouraged to join the taxed, formal business sector”.
Mamdouh said that broadening the tax base will prove difficult because “there is nothing that encourages the informal sector to join the formal one”.