Egypt entered the 21st century under a cloud of economic uncertainty. For much of the 20th century, Egypt's experiments with socialism left the economy in a shambles. The open-door policy, begun in the 1970s, set the stage for partial economic recovery, but it was not until the 1990s that the government embarked on a real reform and privatization program to address the country's woes. The economic reform program has been successful, with Egypt's business climate continuing to improve. The government appears committed to the path of reform started in the early 1990s, and if the longer-term structural reforms, especially privatization, are accelerated and fully implemented, then Egypt will be able to position itself as a leading economy in Africa and the Middle East.
Despite major reform efforts, however, economic growth has slowed down considerably since 1998. The public sector continues to be a major force in the economy. According to the EIU Economic Profile for 2000-01, the Egyptian government today accounts for one-third of total GDP, two-thirds of non-agricultural GDP, and two-thirds of manufacturing. In addition to the need to reduce its dominant role in the economy, the government is hard-pressed to meet several serious challenges that are crucial to the success of its economic reform program and, more importantly, its long-term political stability. These include addressing the unemployment problem and achieving social stability. To achieve that goal, Egypt will have to sustain a real GDP growth of about 6 percent, which would require dealing with the low levels of domestic savings and investment, increasing competition in the domestic economy, and stimulating export performance, as well as reducing dependence on foreign sources of income, primarily remittances and foreign assistance. Although aware of the possible political repercussions associated with its economic program, the government has done little to alleviate its impact on the majority of Egyptians, whose living standards have continuously deteriorated over the last decades. And it remains to be seen whether popular support for the government's economic reforms will outlast Egypt's enduring economic difficulties.