Egypt needs to invest in the economy recovery to improve labor market: Bloomberg

While the economy outlook is improving as covid-19 restrictions are lifted, policymakers need to “translate” these gains into an improved labor market, according to Bloomberg.

Egyptian firms last month reduced employment at the quickest rate in nearly four years, according to IHS Markit. The unemployment rate reached 9.7 percent in April, according to the Planning Ministry, compared with 7.9 percent at the end of last year.

More than a quarter of employed Egyptians lost their jobs between the end of February and May, even as they sought to keep working during the pandemic, the report showed. It didn’t say how many people were surveyed.

The number of new virus infections reported has declined in recent days. And the relaxation of restrictions is already making a difference for the non-oil private sector, with business conditions rebounding in June to a four-month high. But the challenge now is to translate the improved outlook into gains for the labor market.

Almost one-third of Egyptian households said their income was insufficient to meet their needs in May.

What are the solutions

For a recovery in the labor market to take hold, Egypt would need to see an improvement in tourism, one of the biggest employers. According to the United Nations Conference on Trade and Development, Egypt is among a handful of countries where the collapse of tourism could cost 3% of gross domestic product or more this year.

Rebounding is not far off

Despite the job losses, IHS Markit believes a turnaround isn’t far off. A measure of conditions in the non-oil private sector bounced back in June thanks to slower rates of decline in new business and activity, according to a report on Monday.

“Employment numbers still fell at an accelerated rate in June, although multiple signals suggest this will soon change,” David Owen, economist at IHS Markit, said in the report. “Higher demand at some companies, increased backlogs and sentiment rising to a six-month high all point to firms hopefully restarting hiring in the near future.”