The political situation in many countries in Northern Africa has made it difficult to have economic growth and stability. The constant changing of governments is not attractive for businesses. While the population has been increasing in Tunisia, there has not been as much economic growth as needed (Badawy, 2011). Due to political instability, investors are not willing to invest in companies in Northern Africa. The political situation is not attractive to investors ("Africa's Top 250 Countries: North Africa").
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Tifotter, Creative Commons
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Change
There has been change in economics in Northern Africa from 1980 to present because of the discovery of oil and natural gas in Algeria and Libya. Prior to the 1980's, Algeria did not heavily rely on oil and natural gases in each country's economy (Krieger, 2004).
Egypt dealt with depreciation when the Central Bank got rid of the beg. There was also an increase in the price level in the first quarter of 2017 which significantly decreased the purchasing power. The exchange rate in Egypt has also decreased (Coughlan, 2017).
In recent years, Tunisia has began to have an increased GDP (Coughlan, 2017).
There has been change in economics in Northern Africa from 1980 to present because of the discovery of oil and natural gas in Algeria and Libya. Prior to the 1980's, Algeria did not heavily rely on oil and natural gases in each country's economy (Krieger, 2004).
Egypt dealt with depreciation when the Central Bank got rid of the beg. There was also an increase in the price level in the first quarter of 2017 which significantly decreased the purchasing power. The exchange rate in Egypt has also decreased (Coughlan, 2017).
In recent years, Tunisia has began to have an increased GDP (Coughlan, 2017).
Before 2017, the price levels were not as high, and consumer spending increased each year.
Deloite, Planet Retail
Inflation
Inflation is expected to increase as it was 4.8% in February and it was 4.4%. The inflation rate is expected to rise to 5% in the next year in the MENA (Torne, 2017).
Inflation is expected to increase as it was 4.8% in February and it was 4.4%. The inflation rate is expected to rise to 5% in the next year in the MENA (Torne, 2017).
Population
In 2011, it was stated that the population of Northern Africa is increasing, but the job opportunities are not increasing. According to Badaway, countries in Northern Africa need an economic growth of 6% in order to provide enough jobs for its population. Specifically there has been a large growth of the population in Tunisia and Egypt (Badaway, 2011). In 2015, it was said that the expected overall GDP growth rate in the Middle East and North Africa would be 3%. While this is a slight improvement from the 2.8% growth rate in 2014, the GDP growth rate has not reached the level that is needed ("The Economic Outlook for the Middle East and North Africa," 2015). In the late 1980's, Tunisia only represented 3% of world trade which does not represent a high rate of economic growth. The countries in Northern Africa began to make a larger effort in order to compete with other countries. In the 1980's Europe was doing well with trade, so countries in Northern Africa wanted to become more globalized. In 1989, there was not enough revenue from oil sales, so Algeria, Libya, Mauritania, Morocco, and Tunisia decided to work together and created the Union du Maghreb Arabe (UMA) (Krieger, 2004).
In 2011, it was stated that the population of Northern Africa is increasing, but the job opportunities are not increasing. According to Badaway, countries in Northern Africa need an economic growth of 6% in order to provide enough jobs for its population. Specifically there has been a large growth of the population in Tunisia and Egypt (Badaway, 2011). In 2015, it was said that the expected overall GDP growth rate in the Middle East and North Africa would be 3%. While this is a slight improvement from the 2.8% growth rate in 2014, the GDP growth rate has not reached the level that is needed ("The Economic Outlook for the Middle East and North Africa," 2015). In the late 1980's, Tunisia only represented 3% of world trade which does not represent a high rate of economic growth. The countries in Northern Africa began to make a larger effort in order to compete with other countries. In the 1980's Europe was doing well with trade, so countries in Northern Africa wanted to become more globalized. In 1989, there was not enough revenue from oil sales, so Algeria, Libya, Mauritania, Morocco, and Tunisia decided to work together and created the Union du Maghreb Arabe (UMA) (Krieger, 2004).
Exchange Rates
Egypt, Morocco, and Tunisia are in need of a change in the exchange rates. It is difficult for the countries to trade with the current exchange rates. In 2004, Egypt began to use a fluctuating exchange rate which would allow the country's currency to become dependent and change based on the foreign currency market. The reasoning behind this was that it would help impede bargaining trade with tariffs (Nabli and Dasgupta, 2004).
Egypt, Morocco, and Tunisia are in need of a change in the exchange rates. It is difficult for the countries to trade with the current exchange rates. In 2004, Egypt began to use a fluctuating exchange rate which would allow the country's currency to become dependent and change based on the foreign currency market. The reasoning behind this was that it would help impede bargaining trade with tariffs (Nabli and Dasgupta, 2004).
Oil
Oil is a large export of many countries in Northern Africa. Specifically in Algeria, oil is a large export of the country. In 1997, Algeria's share of exporting oil was 95%. During this time period, it was also expected that the labor force would increase by 30% (Sorsa, 1999). Like today, there are not enough jobs for people entering the labor force in Northern Africa.
Oil Prices have dropped within recent years which has greatly affected the economy in Northern Africa. Many countries in Northern Africa heavily rely on exporting oil, so the drop in oil prices has heavily affected the economy (Raschen, 2015). Specifically, Libya and Algeria are suffering from the drop in oil prices. In 2015, it was stated that oil exporters were expected to grow to 1.5% compared to 0.9% in 2014. ("The Economic Outlook for the Middle East and North Africa," 2015). The oil industry in Northern Africa is struggling right now because there is a lower crude supply (Torne, 2017).
Recently in 2017, it has been expected that countries in the Middle East and Northern Africa will do better as the oil prices have risen. While the economy is not completely stabilized, it is slowly improving. The higher oil prices have helped domestic financial markets which is stimulation private activity as the interest rates are lower (Torne, 2017). While there seem to be improvements, the MENA is still not at the GDP level which is desired. In the first quarter of 2017, the GDP was 2.1%, but in Quarter 3 and Quarter 4 of 2016, the GDP was 2.9% (2017).
Oil is a large export of many countries in Northern Africa. Specifically in Algeria, oil is a large export of the country. In 1997, Algeria's share of exporting oil was 95%. During this time period, it was also expected that the labor force would increase by 30% (Sorsa, 1999). Like today, there are not enough jobs for people entering the labor force in Northern Africa.
Oil Prices have dropped within recent years which has greatly affected the economy in Northern Africa. Many countries in Northern Africa heavily rely on exporting oil, so the drop in oil prices has heavily affected the economy (Raschen, 2015). Specifically, Libya and Algeria are suffering from the drop in oil prices. In 2015, it was stated that oil exporters were expected to grow to 1.5% compared to 0.9% in 2014. ("The Economic Outlook for the Middle East and North Africa," 2015). The oil industry in Northern Africa is struggling right now because there is a lower crude supply (Torne, 2017).
Recently in 2017, it has been expected that countries in the Middle East and Northern Africa will do better as the oil prices have risen. While the economy is not completely stabilized, it is slowly improving. The higher oil prices have helped domestic financial markets which is stimulation private activity as the interest rates are lower (Torne, 2017). While there seem to be improvements, the MENA is still not at the GDP level which is desired. In the first quarter of 2017, the GDP was 2.1%, but in Quarter 3 and Quarter 4 of 2016, the GDP was 2.9% (2017).
Arab migrant remittances as a share of GDP in the Middle East and North Africa in 2013, by select country, World bank, 2013.
Politics
Politics have greatly affected economics and business in Northern Africa. There is great instability in many countries in Northern Africa. In 2011, there were massive protests against the president of Tunisia. The protests led President Ben Ali to flee the country ("Tunisia Country Profile," 2017). This political instability is not attractive to investors. -Egypt: Egypt is currently going through a political reform which will have a positive effect on its economy and will encourage investment in businesses in Egypt. -Libya: In 2014, Libya was split. The government was split into 2. Libya was the main exporter of oil, but the political situation affected the economy (Libya on the Edge, 2014). |
Ghrabi, Creative Commons
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Starting a Business in Egypt
The political situation in Egypt has caused capital flight making it unattractive for foreigners to invest. Due to this issue, an investment law has been implemented in order to make it more attractive for investors. There are different benefits for investors (i.e. an investor might get a tax break for a certain amount of years if they invest in businesses in certain fields). It is not difficult to start a business in Egypt because there is a lack in startups and investing ("Guide to Egypt- Etiquette, Customs, Culture & Businesses," 2017).
The political situation in Egypt has caused capital flight making it unattractive for foreigners to invest. Due to this issue, an investment law has been implemented in order to make it more attractive for investors. There are different benefits for investors (i.e. an investor might get a tax break for a certain amount of years if they invest in businesses in certain fields). It is not difficult to start a business in Egypt because there is a lack in startups and investing ("Guide to Egypt- Etiquette, Customs, Culture & Businesses," 2017).
Trade and investment are crucial in order for countries in North Africa to grow.
Sources
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E. (2012, November 15). EU-Egypt Task Force Signing Ceremony. Retrieved April 20, 2017, from https://www.flickr.com/photos/eeas/8188272234/in/photolist-gwGYis-8XpyH-gwGdQo-dtkcMV-ope5PM-gwGcqu-dtz2WC-dtkd18-dttuvg-PhLmo-aw3MSq-aGynU4-7cgigh-dtz31E-26pi1T-dtz3cf-dtz34u-dtkp6u-dtkd4Z-dtkcJR-dtkpju-dtz2P1-dttuD8-dtkpqf-dtkd8g-dttuyt-dtkdc2-dtkpnY-zYdWLU-RFSd4q-AanBD6-dttuMK-dtz3gu-dttuQz-BRtGm5-BTML2T-B4yDtu-BYLN1u-BYLN8y-BRu3bf-C25fkg-C25fYv-ByWGxJ-APEe7r-G6wfbm-FZDojo-wep8KN-LEudBQ-FHGDqJ-rVN4s4.
ERC Equipoise in North Africa - Olatoyosi Awe - Oil and Gas. (2015, July 03). Retrieved April 20, 2017, from https://www.youtube.com/watch?v=prZIFbLTylU.
Global Immersion: Doing Business in North Africa. (2016, October 11). Retrieved April 19, 2017, from https://www8.gsb.columbia.edu/courses/mba/2016/fall/b8707-001
Guide To Egypt - Etiquette, Customs, Culture & Business. (2015). Retrieved April 19, 2017, from http://www.kwintessential.co.uk/resources/guides/guide-to-egypt-etiquette-customs-culture-business/
Krieger, J. (2013, September 27). Maghreb. . Retrieved April 19, 2017, from http://www.oxfordreference.com/view/10.1093/acref/9780195117394.001.0001/acref-9780195117394-e-0450?rskey=G2bmt8&result=3.
Libya on the edge. (2014, October 20). Retrieved April 20, 2017, from http://www.economist.com/blogs/graphicdetail/2014/10/daily-chart-12?zid=304&ah=e5690753dc78ce91909083042ad12e30.
Raschen, M. (2015, June 9). Focus on Economics [Scholarly project]. In KFW. Retrieved April 19, 2017, from https://www.kfw.de/PDF/Download-Center/Konzernthemen/Research/PDF-Dokumente-Fokus-Volkswirtschaft/Fokus-englische-Dateien/Fokus-Nr.-95-Juni-2015_EN.pdf.
MENA: migrant remittances share of GDP by selected country 2013 | Statistic. (2013). Retrieved April 20, 2017, from https://www.statista.com/statistics/676261/mena-migrant-remittances-share-of-gdp-by-selected-country/
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Total consumer spending in Egypt 2006 to 2010 | Statistic. (2017). Retrieved April 20, 2017, from https://www.statista.com/statistics/233100/total-consumer-spending-in-egypt/