Between 1965 and 2015, the structure of the Egyptian economy changed slowly. The share of agriculture in GDP halved, while industry increased correspondingly, but most of it represented increased value-added in the petroleum sector. The contribution of services remained almost constant. The balance of payments remained in deficit because exchange rate and import protection policies created an anti-export bias. Budget deficits persisted for structural reasons—expenditures increased in line with domestic inflation, while revenues depended upon exogenous sources (e.g. revenues from Suez Canal traffic, petroleum exports, foreign aid) and increased more slowly. The ratio of exports of goods and services to GDP was 17 per cent in 1965 and 14 in 2015; that of imports to GDP 21 and 23 per cent; of taxes to GDP 13 and 14 per cent. An important structural change in the labour market was a substantial increase in informal sector employment. The slowness of the structural transformations is largely attributable to an implicit political-economy compact whereby regimes provided the population large subsidies on goods and services and low taxation in return for political acceptance.
Structural Change in Transition Economies: Does Foreign Aid Matter?
