In 2007, Egypt continued its reformist course, winning the plaudit of "world's top reformer" and praise from the International Montary Fund (IMF). It was also a year of growth; Egypt's Gross Domestic Product (GDP) increased 7.1% in 2007, up from 6.8% in the previous year, and unemployment continued to fall. The government won two votes; a referendum and the upper-house elections, but has yet to come to an agreement with opposition groups.
A November 2007 IMF report praised Egypt's "sustained and bold reforms [and] prudent macroeconomic management", which has delivered high growth and helped bring Egypt's unemployment rate to 9% from 10.5% at the end of 2004. According to the Fund, tight monetary policy, an improvement in the fiscal situation, and structural reforms promoting the private sector have all helped strengthen and broaden the Egyptian economy. While there were warnings that government debt remains painfully high and that a slow "trickle down" of wealth derived from increased growth might imperil public support for reform, the overall message can be seen as an encouraging "keep up the good work" to Egypt's government.
The IMF's praise and support for the reform process came months after Egypt was named the "world's top reformer" in Doing Business 2008, a report published in September by the World Bank and the International Finance Corporation (IFC). After a disappointing performance in 2004-2005, last year, the government "pulled out all the stops [and] its efforts cut deep", the report stated. Egypt won the accolade by enacting more reforms over the past two years than any other country in the world.
Egypt made notable progress in five areas: improving the process of starting a business, licensing, property registration, getting credit, trading across borders and business closure. Cuts in the minimum capital required to start a business, reduction of red tape in acquiring building licences, the establishment of one-stop-shops for exporters and importers and moves to establish a private credit bureau were all cited as examples of pro-business reforms that have moved Egypt forward.
August saw another important move to liberalise the economy and improve the budgetary situation, with the announcement that subsidies currently granted to energy intensive industries would be phased out over three years, and to less power-hungry sectors over six years. This is intended to cut inefficiencies in the market and help reduce the budget deficit. The government hopes to save $2.64bn over the next three years as a result, and allow the market to determine prices. However, a ceiling of 15% price increase per annum will give investors predictability. While there were fears that this move would stoke inflationary pressure, the gradual nature of the subsidy cuts should lessen this effect.
Most businesspeople and economists welcomed the decision.Despite the successes, Egypt has reformed from a relatively low base - i.e. a highly over-regulated economy - and still ranks behind most countries in the region on measures such as ease of hiring and firing workers, and business start-up and closure.
The success of continued reforms in 2008 may determine whether 2007 is remembered largely for economic success or political awkwardness.