Saving and Growth in Egypt

Saving and Growth in Egypt

This study illustrates the mechanisms linking national saving and economic growth, with the purpose of understanding the possibilities and limits of a saving-based growth agenda in the context of the Egyptian economy. This is done through a simple theoretical model, calibrated to fit the Egyptian economy, and simulated to explore different potential scenarios. The main conclusion is that if the Egyptian economy does not experience progress in productivity -- stemming from technological innovation, improved public management, and private-sector reforms -- then a high rate of economic growth is not feasible at current rates of national saving and would require a saving effort that is highly unrealistic. For instance, financing a constant 4 percent growth rate of gross domestic product per capita with no improvement in total factor productivity would require a national saving rate of around 50 percent in the first decade and 80 percent in 25 years. However, if productivity rises, sustaining and improving high rates of economic growth becomes viable. Following the previous example, a 2 percent growth rate of total factor productivity would allow a 4 percent growth rate of gross domestic product per capita with national saving rate in the realistic range of 20-25 percent of gross domestic product.

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Bibliographic Details
Main Authors: Hevia, Constantino, Loayza, Norman
Language:English
Published: 2011-01-01
Subjects:ANNUAL DEPRECIATION RATE, ANNUAL GROWTH, ANNUAL GROWTH RATE, AVERAGE GROWTH, AVERAGE GROWTH RATE, BENCHMARK, BORROWER, BORROWING, CAPITAL ACCUMULATION, CAPITAL INVESTMENT, CAPITAL MARKETS, CAPITAL RETURNS, CAPITAL STOCK, CONSTANT RATE, CONTRACT ENFORCEMENT, CURRENT ACCOUNT, DEBT, DEMOGRAPHIC, DEPRECIATION RATE OF CAPITAL, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT RESEARCH, DEVELOPMENT STRATEGY, DIMINISHING RETURNS, DISPOSABLE INCOME, DOMESTIC SAVING, EARNINGS, ECONOMIC GROWTH, EDUCATIONAL ATTAINMENT, EMERGING MARKET, EMERGING MARKET ECONOMIES, EMPLOYEE, EXPENDITURES, EXTERNAL FINANCING, FACTOR ACCUMULATION, FACTORS OF PRODUCTION, FINANCIAL CRISIS, FINANCIAL INSTITUTIONS, FINANCIAL INSTRUMENTS, FINANCIAL INTERMEDIATION, FINANCIAL MARKETS, FINANCIAL SYSTEM, FIRM PERFORMANCE, FOREIGN CAPITAL, FOREIGN DEBT, FOREIGN INVESTORS, GDP, GDP PER CAPITA, GROSS DOMESTIC PRODUCT, GROSS DOMESTIC PRODUCT PER CAPITA, GROWTH EQUATION, GROWTH MODELS, GROWTH PERFORMANCE, GROWTH RATE, GROWTH RATE OF OUTPUT, GROWTH RATES, GROWTH THEORY, HOUSEHOLDS, HUMAN CAPITAL, INCREASED INVESTMENT, INEQUALITY, INFRASTRUCTURE INVESTMENT, INSTITUTIONAL REFORM, INTEREST RATE, INTERNATIONAL BANK, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL MARKETS, INTERNATIONAL FINANCIAL MARKETS, INVENTORY, INVESTMENT CLIMATE, INVESTMENT OPPORTUNITIES, INVESTMENT RATE, LABOR FORCE, LABOR INPUT, LABOR MARKET, LEVEL OF CAPITAL, LONG RUN, MACROECONOMIC ANALYSIS, MACROECONOMIC STABILITY, MACROECONOMICS, MARGINAL PRODUCTIVITY, MARGINAL RETURNS, MARKET ECONOMIES, MEDIUM TERM, MONETARY POLICY, MULTINATIONAL, NATIONAL ACCOUNTS, NATIONAL INCOME, NET EXPORTS, NEW BUSINESS, OPEN ECONOMIES, OPEN ECONOMY, OUTPUT GROWTH, OWNERSHIP STRUCTURE, PER CAPITA GROWTH, PHYSICAL CAPITAL, POLICY IMPLICATIONS, POLICY MAKERS, POLICY MEASURES, POLICY OPTIONS, POLICY RESEARCH, POLITICAL ECONOMY, PORTFOLIO, PRIVATE SAVINGS, PRIVATIZATION, PRODUCTION FUNCTION, PRODUCTION PROCESS, PRODUCTIVITY GROWTH, PRODUCTIVITY OF CAPITAL, PROFITABILITY, PUBLIC EXPENDITURES, PUBLIC INFRASTRUCTURE, PUBLIC INVESTMENT, RATE OF GROWTH, RATE OF RETURN, RELATIVE CONTRIBUTION, REMITTANCES, RISK PREMIUM, SAVING RATE, SAVINGS, SECTOR REFORMS, SHARE OF OUTPUT, SOLVENCY, SOURCES OF FUNDS, TAX, TAX BURDEN, TAX CODE, TECHNOLOGICAL INNOVATION, TFP, TOTAL FACTOR PRODUCTIVITY, TOTAL OUTPUT, VALUATION, VALUE OF OUTPUT,
Online Access:http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110113095021
https://hdl.handle.net/10986/3302
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Summary:This study illustrates the mechanisms linking national saving and economic growth, with the purpose of understanding the possibilities and limits of a saving-based growth agenda in the context of the Egyptian economy. This is done through a simple theoretical model, calibrated to fit the Egyptian economy, and simulated to explore different potential scenarios. The main conclusion is that if the Egyptian economy does not experience progress in productivity -- stemming from technological innovation, improved public management, and private-sector reforms -- then a high rate of economic growth is not feasible at current rates of national saving and would require a saving effort that is highly unrealistic. For instance, financing a constant 4 percent growth rate of gross domestic product per capita with no improvement in total factor productivity would require a national saving rate of around 50 percent in the first decade and 80 percent in 25 years. However, if productivity rises, sustaining and improving high rates of economic growth becomes viable. Following the previous example, a 2 percent growth rate of total factor productivity would allow a 4 percent growth rate of gross domestic product per capita with national saving rate in the realistic range of 20-25 percent of gross domestic product.

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