WHICH SECTORS DRIVE EGYPT’S GROWTH AND EMPLOYMENT?

Abstract

According to the International Monetary Fund, Egypt’s employment elasticity of growth in the
last two decades was relatively low, as previous policies focused on capital deepening rather
than improving labor utilization growth rate. This paper uses input-output analysis to identify
the economic activities that have high output and employment multipliers at the subsector level
of manufacturing and services in Egypt, while previous multiplier research for Egypt analyzed
manufacturing as an aggregate sector. The top 20 ranking subsectors in terms Fof employment
multipliers include 13 services and 7 manufacturing subsectors. Except for food and accommodation
services, most of the services subsectors gain their high rank from direct and induced employment,
with little contribution of backward interlinkages. The picture is mixed for manufacturing. For
example, most of the employment effect of food products and beverages is attributed to the
interlinkage with the agriculture sector, but the direct and induced employment effects are small.
The paper presents an illustrative exercise which excludes imported intermediate inputs in order
to account for the possible overestimation of the multiplier effect due to imports. The employment
multiplier is reduced by more than 30% in the sectors which use intermediate inputs from high
import upstream sectors.