BMI View: Egypt's IT market is forecast to increase to EGP10.878bn in 2013, although growth will be slower than in 2012. A curtailment of government spending and a slowdown in real terms growth of private consumption are responsible for slower growth. Although the IT market opportunity is constrained by political and economic uncertainty, over BMI's five-year forecast period, Egypt will benefit from youthful demographics and improving information and communication technology (ICT) infrastructure. The government's policy framework for developing the ICT sector through to 2012 is also a positive for medium-term performance.

Headline Expenditure Projections

Computer Hardware Sales: EGP6.175bn in 2012 to EGP6.484bn in 2013, +8.2% in local currency terms. Growth outlook worse in 2013 compared with 2012 as a result of the slowdown in private consumption and government spending growth.

Software Sales: EGP1.408bn in 2012 to EGP1.6bn in 2013, +14.3% in local currency terms. Sales of Windows 8 and the medium-term potential of small and medium-sized enterprise investments pushing up the growth rate.

IT Services Sales: EGP2.474bn in 2012 to EGP2.785bn in 2013, +12.6% in local currency terms. Demand from government, finance and telecoms sectors accounting for more than half of total spending. Growth of outsourcing industry also key.

Risk/Reward Ratings: Egypt's score is 38.8 out of 100.0, and the country is at the bottom in our latest Middle East and Africa risk/reward ratings table, behind Saudi Arabia, Kuwait and South Africa. Despite the high growth potential of the market, which was reflected in an industry rewards score of 40.0, Egypt's overall ranking was constrained by a lowest-in-region country rewards score of just 25.0.

Key Trends And Developments

Egypt's IT market made a strong recovery from the economic and political upheaval of 2011; however ongoing uncertainty around economic policy and political stability have been a drag on investment in the IT sector. That said, a favourable cost base and proactive government initiatives to attract investment and boost adoption of ICT by the populace has ensured continued growth of sales.

The government has outlined its National ICT Strategy for 2012-2017 that looks set to underpin continued growth in sales. The government is targeting 3mn broadband subscriptions, with household PC penetration increasing to 40% by 2017. This will boost the consumer hardware market. Meanwhile, it has stated its intention to fully digitise primary school education by 2015, ensuring the younger generations will come out of the system with a demand for ICT products and services.

The government is also looking to add to recent momentum in the Egyptian outsourcing industry. It is targeting US$2.5bn in outsourced IT revenues by 2017, and at the same time create 75,000 outsourcing job opportunities, with 30,000 in IT and 10,000 in innovation. A recent example of the steps it is taking comes from the memorandum of agreement between Information Technology Industry Development Agency (ITIDA) and Swiss company QCentris to expand its global customer service centre, which opened in May 2012. ITIDA is offering QCentris cheaper international calls by using agreed connection lines between ITIDA and Telecom Egypt to incentivise its investment.

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