Infrastructure and economic growth in Egypt

In the past half a century, Egypt has experienced remarkable progress in the provision of infrastructure in all areas, including transportation, telecommunication, power generation, and water and sanitation. Judging from an international perspective, Egypt has achieved an infrastructure status that closely corresponds to what could be expected given its national income level. The present infrastructure status is the result of decades of purposeful investment. In the past 15 years, however, a worrisome trend has emerged: Infrastructure investment has suffered a substantial decline, which may be at odds with the country’s goals of raising economic growth. Improving infrastructure in Egypt would require a combination of larger infrastructure expenditures and more efficient investment. The analysis provided in this paper suggests that an increase in infrastructure expenditures from 5 to 6 percent of gross domestic product would raise the annual per capita growth rate of gross domestic product by about 0.5 percentage points in a decade’s time and 1 percentage point by the third decade. If the increase in infrastructure investment did not imply a heavier government burden (for instance, by cutting down on inefficient expenditures), the corresponding increase in growth of per capita gross domestic product would be substantially larger, in fact twice as large by the end of the first decade. This highlights the importance of considering renewed infrastructure investment in the larger context of public sector reform.