The Effect of Informal Economy on Budget Deficit in Egypt | ||
| مجلة کلية الآداب جامعة الفيوم | ||
| Articles in Press, Accepted Manuscript, Available Online from 11 November 2025 | ||
| Document Type: المقالة الأصلية | ||
| DOI: 10.21608/jfafu.2025.433544.2335 | ||
| Authors | ||
| عبير منصور عبد الحميد Mansour* 1; dr.Abeer Mansour1; Waleed Eid Mostafa2; Mohamed Ahmed Mohamed3 | ||
| 1جامعة جنوب الوادى | ||
| 2جامعة اسيوط كلية التجارة | ||
| 3كلية التجارة جامعة اسيوط | ||
| Abstract | ||
| The informal economy has attracted increasing international attention, as understanding its size and evolution is crucial for effective policymaking. Despite the growing global literature on methods of measuring the informal sector over the past three decades, research focusing specifically on Egypt remains limited. Therefore, this study seeks to estimate the size of Egypt’s informal economy, thereby filling a gap in the literature and supporting policymakers in formulating appropriate public policies by illustrating the magnitude of informal activities. Additionally, the study examines the impact of the informal economy on Egypt’s public budget deficit. Using annual time series data for the period 1990–2020, the research employs the Autoregressive Distributed Lag (ARDL) model, the Bounds testing approach, and the Error Correction Model (ECM). The findings reveal that the informal economy in Egypt represented, on average, about 63% of the country’s Gross Domestic Product (GDP) during the study period. Moreover, the results indicate a positive relationship between the informal economy and the budget deficit, as informal activities and the associated tax evasion cause a significant loss of government evenues, thereby exacerbating the fiscal deficit. The study concludes with several key recommendations, the most important of which is the need to address the underlying factors that drive individuals to participate in informal economic activities. This can be achieved by simplifying the process of obtaining business licenses and improving access to finance for small and medium-sized enterprises (SMEs). | ||
| Keywords | ||
| Informal Economy; Budget Deficit; ARDL; Egypt | ||
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