The original aim of this povertyanalysis, prepared in collaboration with Egypt'sMinistry of Economic Development, was to help inform thecountry's development strategy and guide World Bankassistance in support of that strategy over the comingyears. This objective remains nevertheless valid, althoughthe timeframe for addressing some of the most criticalissues, such as the high rate of extreme poverty,vulnerability, and food insecurity may now be accelerated.The authors believe that the analysis presented in thisnote, while being based on data that precede the actualonset of the current political crisis, reveals deep tensionsin the society that are linked to the high level ofvulnerability and the lack of an efficient and flexiblesocial assistance system. This report assesses the povertyand welfare changes in Egypt between 2008 and 2009 andpresents a comprehensive picture of the evolution of povertybetween 2004/05 and 2008/09. Poverty in Egypt decreasedbetween 2005 and 20082, due in large part to rapid economicgrowth, although high inflation during this period haddetrimental effects on the extreme poor. Yet, the suddeneconomic slowdown in the context of accelerating inflationin 2008/2009 reversed the gains in poverty reductionachieved during the period of rapid growth. The increase inpoverty closely followed the accelerating inflation during2008 causing vulnerable groups to be particularly affectedby the economic turbulence. Despite these setbacks, some ofthe gains from the rapid growth between 2005 and 2008 weresustained over the crisis period. Policies aimed at helpinghouseholds withstand the effects of the crisis were howevernot sufficient to prevent an increase in poverty. The crisisexposed underlying vulnerabilities in Egypt s socialprotection system. Finally, the adverse effects of foodprice shocks on the real incomes of Egypt s poor point tothe need for further analytical work on labor markets, inparticular wage policy, as part of the social riskmanagement framework.
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