The Economic Impact of Telecommunications in Egypt

The Egyptian telecommunication sector grew by 17% during the second quarter of the fiscal year 2020/21, the highest among all sectors in the economy, proven to be remarkably resilient in the face COVID-19 pandemic and the Delta variant. Using quarterly time-series dataset over the period 2000 – 2019, the study estimates the direct economic impact of telecommunications on economic growth measured by the revenues generated by the sector and the indirect economic effect (or spillover) of telecommunications on the economy by employing a structural econometric model based on an aggregate production function, a demand function, a supply function, and an infrastructure function to detect causality and examine long-run relationships between variables. This study uses two measures of telecommunications, mobile unique subscribers and mobile broadband capable device penetration to quantify the spillover effects of mobile telecommunications on the economy. Statistics show that telecommunications sector’s revenue comprised 4.4% of GDP, reflecting the direct effect of telecommunications on the economy. Additionally, according to the structural model, mobile unique subscribers and mobile broadband capable device penetration significantly contributed to the Egyptian GDP growth between 2000 and 2019. More specifically, the estimation results show that for every 1% increase in penetration in mobile unique subscriber penetration and mobile broadband capable device adoption, the average annual contribution to GDP growth is estimated to increase by 0.172% and 0.016%, respectively. On this basis, this study provides policy recommendations related to maximizing investment in network utilization including mobile, Internet services, and fixed broadband subscriptions. Research extensions would include testing the significance of complementarities such as improving governance measures and building human capacity for both households and firms, which are necessary to boost the impact of telecommunication on economic growth in Egypt