Responding to the Financial and Economic Crisis:The Case of Egypt

BYSamir Radwan

Thematic Dialogue 3 of the Committee of the Whole

International Labor Conference (ILC) 4 June 2009

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Suez Canal proceeds registered a negative rate of growth of -22% compared to a positive growth rate of 12.7%

Tourism registered a negative rate of -6% compared to a positive rate of 23% during the same period.

Manufacturing, which grew at 8.3% in the Third Quarter of 2007/08 went down to only 3.5% during the same period of 2008/09.

Two sectors go against the current, vis, communications and construction which grew at 13.6 % and 16% respectively. Agriculture continued its unchanged pattern with the growth rate hovering around 3%.

Egypt: Impact on the Real EconomySectoral Impact of the Crisis

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Official estimates point to an increase in the employment rate during the Third Quarter of 2008/09 to 9.4% compared to 8.8% in the previous quarter.

A recent survey of the unemployed has shown that 15.3% of the presently unemployed people was due to the economic crisis, while 41.3% was due to a reduction wages.

The Center for Trade Union and Workers Service (an activist NGO) has reported that some 88,000 people lost their jobs between January and March this year. According to this report, most job losses are in the textile and tourism sectors.

 

Egypt: Social and Labor ConsequencesUnemployment on the rise

Unemployment Rates (%)

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Unemployment Rates in MENA (%)

Region 2007 2009

World 5.7 7.1

Developed Economies and EU

5.7 7.9

Central and South Eastern Europe and CIS

8.5 9.8

East Asia 3.5 5.5

South East Asia and Pacific

5.5 6.4

South Asia 5.3 6.2

Latin America and Caribbean

7.2 8.3

Middle East 9.4 11.0

North Africa 10.4 11.2

Sub-Saharan Africa 7.9 8.5

Source: ILO, Global Employment Trends, January 2009, p34

Unemploymen

t rates in

MENA are the

highest in the

world, and

rising

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Source: ILO, Global Employment Trends Update , May 09,p44

Unemployment Rates in MENA

Middle East North Africa

In 2009, unemployment in MENA is roughly in line with earlier estimates of ILO, with an upper estimate of 1.6 million additional unemployed in the Middle East which would represent an increase of approximately 25%, and in North Africa, representing an increase of approximately 13%.

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School to Work Transition Unemployment in the Arab world is dominated

by first-time job seekersFirst-time-job seekers as a % of total unemployed

Source: based on data from Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards Effective Policies and Mechanisms, Table 3 p65

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Prevalence of Informal Employment

Almost half the non-agricultural labor force find employment in low-productivity, low-income occupations.

Informal employment as a % of non-agricultural employment

Total Female Male Latin America

51 58 48

Asia 65 65 65 Sub-Saharan Africa

72 84 63

North Africa 48 43 49 Algeria 43 41 43 Morocco 45 47 44 Tunisia 50 39 53 Egypt 55 46 57 Syria 42 35 43

Source: Arab Labor Organization, First Arab Report on Employment and Unemployment in the Arab Countries: Towards Effective Policies and Mechanisms, Cairo 2008, p245 7

Egypt: Social and Labor ConsequencesIncreased Incidence of Poverty

A total of 6.7 million people have come into poverty during the period 2005-2008

Poverty Dynamics 2005 – 2008 (All Population=100).

Source: World Bank, Economic Growth, Inequality and Poverty: Social Mobility in Egypt between 2005 and 2008, December 2008, p.6

Percentage Population, millions Chronic Poor – Poor in 2005 and 2008

10 7.4

Into Poverty - Non Poor in 2005 and poor in 2008

9 6.7

Out of Poverty – Poor in 2005 and Non Poor in 2008

12 8.9

Never Poor – Non Poor in 2005 and 2008

69 51.0

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Working Poor in MENA

Middle East North Africa

In addition, working poor is expected to increase with the global crisis.

Source: ILO, Global Employment Trends Update , May 09,p44 9

Source: Energy Information Administration, release date: 5/28/2009

Impact on the Oil MarketOil Prices

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Source: Energy Information Administration, release date: 5/28/2009

Impact on the Oil MarketOil Revenues

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Working out of the CrisisA decent Work Agenda: The Egyptian Government’s Stimulus Package

1. Stimulating demand through an expenditure package of LE 13.3 billion(mainly allocated to infrastructure projects, export promotion and social benefits).

2. A total of LE 1.7 billion reduction in customs on imports of intermediate and capital goods.

3. Reducing interest rate over two successive stages by 1% and 0.5% as inflation goes down.

4. Providing the private sector with other incentives especially to stimulate new investment

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Dealing with the CrisisDecomposition of Rescue Packages

Source: ILO, the Financial and Economic Crisis: A Decent Work Response, Geneva 2009, p48 13

Looking into the FutureLaying the Foundation for the Post-Crisis Economy and Society

The regeneration of employment-intensive-growth

Projections of annual increase in the Labour Force, 2004-2013

In specific terms, the post-crisis recovery should take as its objective the creation of 950 thousand to a million jobs every year in the medium term as suggested by the labour force projections.

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Labour Force (m) 20.9 21.8 22.9 23.9 24.6 25.9 26.8 27.6 28.5 29.6Annual increase (m) 0.9 1.1 1 0.7 1.3 0.9 0.8 0.9 1.1% increase 4.3% 5.0% 4.4% 2.9% 5.3% 3.5% 3.0% 3.3% 3.9%

Source: EIU, Egypt Country Forecast, March 2009, p 12

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Looking into the FutureLaying the Foundation for the Post-Crisis Economy and Society

Restructuring the Egyptian Economy

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Looking into the FutureLaying the Foundation for the Post-Crisis Economy and Society: Elements of a JOBS PACT

Improving Labour Market Policies and institutions

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Egypt: Seeing the Opportunity presented in a CrisisA Full-Fledged Vision : The Goals

Current Situation Economic Goal to be achieved by 2011

GDP grows at 3.8% (2009 estimate)

GDP grows at 7%

Gross Fixed Investment accounts for 19% of GDP

Gross Fixed Investment reaches 25% of GDP

The incidence of poverty currently represents 19% of the total population

Poverty incidence not to exceed 20%

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Egypt: Seeing the Opportunity presented in a Crisis A Full-Fledged Vision : The Means

1. Inject at least LE 25 billion annually from 2009 to 2011 in order to stimulate demand.

2. Use monetary policy to determine interest rates while ensuring a reasonable balance between economic growth and inflation.

3. Execute a multi-faceted plan aimed at creating the ideal investment climate for investors.

4. Enhance domestic credit growth

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What role ILO?

Initiation of interagency missions at the country level to work out the details of employment-intensive growth in the post-crisis period

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