Event

The Economic Development Conference held mid-March in Sharm el-Sheikh has led to the conclusion of USD 54bn investment contracts. They are mostly focused on the energy sector, including a high share in renewable energies, but also in infrastructure and real estate with a new capital city to be built at the east of Cairo. Moreover, Gulf countries – primarily Saudi Arabia and UAE - reiterated their USD 12.5bn financial aid (through investments and deposits at the central bank) to Egypt and high participation in investment projects such as the expansion of the Suez Canal.

Impact on country risk

This major economic event aimed as a plebiscite for president Al-Sisi was also intended to strengthen his political and international legitimacy and boost Egypt’s investment attractiveness. Considering the amount of pledged investments and attendance of over 20 head of states (supporting Al-Sisi as a top player for regional stability) and thousands of participants, Al-Sisi has succeeded. In a more confident climate, the main financial support came unsurprisingly from Gulf allies which will continue mitigating Egypt’s financial risks in the short term thanks to their significant support. However, looking forward, the hardest has yet to be achieved. Megaprojects were already planned under Mubarak’s regime and failed to deliver concrete results whereas some investments announced at the Conference were reconfirmed. Economic challenges add to social ones in a country where most people are young, many are unemployed, poor, and could barely benefit from announced investments. Moreover, implementing the economic reform agenda will be crucial to investment projects and to support Al-Sisi’s liberal stance. Finally, far from a business as usual environment, the massive deployment of soldiers around the Conference shows that despite a recovering economic momentum, the security threat remains a major hurdle to investments and economic normalisation in Egypt.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com