Trade Liberalization with BRICS: A CGE Model of Egypt

Trade Liberalization with BRICS: A CGE Model of Egypt
Author: Kareem Ashraf Mohamed Ahmed
Degree: Master of Arts in Economics
Date: 2024
Institution: The American University in Cairo, Egypt
Advisor: Dr. Abeer Elshennawy

This master’s thesis provides an ex-ante evaluation of the potential economic impacts of a Free Trade Agreement (FTA) between Egypt and the BRICS countries, focusing on both economy-wide and sectoral effects, with particular attention to manufacturing. The study employs a static Social Accounting Matrix (SAM)-based Computable General Equilibrium (CGE) model calibrated to Egypt’s 2018–2019 SAM data.

The research is distinguished by its detailed analysis of manufacturing subsectors and its simulation of Egypt’s trade liberalization not only with core BRICS members but also considering an expanded bloc including Saudi Arabia, UAE, Ethiopia, and Iran, which joined BRICS alongside Egypt in 2024. The findings suggest that liberalization would increase real household consumption across all income levels, with lower-income households benefiting disproportionately. Real GDP is projected to grow, although inflation is introduced via local currency depreciation, indicating a positive exchange rate pass-through.

Sectoral results reveal that industries dependent on local intermediate inputs face challenges from increased foreign competition and do not benefit from reduced import prices, whereas sectors with competitive export prices gain advantages from the cheaper domestic currency. Overall, the thesis provides insights into how trade liberalization with BRICS could reshape Egypt’s economic structure, offering guidance for policymakers on potential distributional and sectoral effects of integration.