Egypt's economy on the brink of disaster
Tourists marvel at the Sphinx while Khufu pyramid looms behind at Giza, just outside Cairo, Egypt. Tourism has taken a hit after the revolution. (Getty Images)
May 29th, 2011
07:57 AM ET

Egypt's economy on the brink of disaster

Editor’s Note: The following article was originally published in France’s Le Monde. English versions of their articles, and others from top global media, are produced by Worldcrunch.com.

By Florence Beaugé

CAIRO – On the banks of the Nile, carriages and feluccas are waiting desperately for tourists. Despite ridiculously cheap rates offered by travel agencies, foreign visitors are hard to find. A few steps away, the tall, charred building that once served as the headquarters of the Democratic National Party, Egypt’s former ruling party, is a reminder of the violence of recent events.

It is now three months since Hosni Mubarak was overthrown, and the Egyptian economy is in a critical state. The country that just a few months ago was struggling to get back on its feet after the financial crisis, and hoping for 7% growth in 2011, now has to make do with an estimated growth of 1%. The International Monetary Fund (IMF) is projecting 4% growth for Egypt in 2012, but the absence of political stability renders the situation very uncertain.

Read: Fareed Zakaria says Egypt is still run by a military dictatorship.

Meanwhile, the Egyptian economy is operating at only 50% of its capacity: the tourism sector is waning, factories are paralyzed by strikes and sit-ins, exports have taken a steep plunge, and the construction sector is at a standstill. Since February, the country has been losing $40 million (28,5 million euros) each day, and foreign investment is “nearing zero,” warned Marshal Hussein Tantaoui, head of Egypt’s ruling military council.         

In Egypt, as in Tunisia, the new government (which has promised to relinquish power after this autumn’s legislative and presidential elections) has a hard time meeting the rising economic demands of its population, half of whom live on less than two dollars a day. In the last few months, plans have been made to establish 700,000 public sector jobs, and public sector pay and pensions have been increased by 10 to 30%, despite the risk of aggravating an already soaring budget deficit. Sky-high inflation (12%) contributes to the tense social climate, to the point that some commentators such as Hichan Mourad, editor in chief of El-Ahram Hebdo, fear that the “democratic process might be derailed.”

Read: Mladic’s capture a victory for European soft power.

“We don’t yet have real independent unions in this country. So people take to the streets for legitimate reasons, but sometimes for unrealistic ones too,” says Samir Soliman, economics professor at the American University in Cairo. Some may call for better wages, others demand a proper dwelling for their children, and Copts (who make up 10% of the population) want to stop being “second-class citizens.” According to Issandr El-Amrani, analyst and author of the highly successful blog The Arabist, Egyptians are “keen on making petitions,” but their claims are not “very clear.” They want to show that “this is only the beginning of their revolution,” and that they are determined to “go even further.”

Saoud Omar, union member and a long-time militant for workers’ rights, emphasizes the fact that the Egyptian contestation movement goes back further than this year, and that it could continue for a long time. “Everyone blames workers, as if they were responsible for Egypt’s woeful economic situation,” he says. “But their claims are justified: they are working in appalling conditions and all they get are miserable salaries. The strikes they organized in 2006, for the very same reasons, were even worse than those we are seeing today.”

Read: Is China cooking its books on its census data?

In the business world, anxiety runs deep. Many are furious about the loss of their privileges from the Mubarak era. Others, such as Azer Farag, president of the engineering company EGTS, fret about the risks of the current transition period: spiralling inflation, gaping deficit (expected to reach 8.4% of gross domestic product in 2011) and external debt (74.9% of GDP).

“We have largely built our economy on fluctuating resources, such as tourism. The result is that all those working in the sector, most of them temporary workers, no longer have any income. The same thing goes for the 18 million people working in the informal sector,” he says. Mr Farag blames the former president Mubarak for “not even having been capable enough to give Egypt what Ben Ali bestowed on Tunisia”: proper education and health-care systems, and a secular state.

Read: A Chinese point of view on the next IMF chief.

Mounir Makar, CEO of a company specialized in organic products, worries about the current “witch-hunt” climate, in the name of anti-corruption. Bosses have been imprisoned, sometimes based on simple denunciation or press campaigns. Properties have been seized, and companies closed. “There’s a risk that this hunt could discourage big Egyptian investors from helping kick-start the economy”, he worries. “Now, the private sector provides 70% of jobs.”

In the impoverished Cairo neighborhood of Imbala, Copts and Muslims are united by the same poverty, despite the recent sectarian violence. “We were told that the revolution would change people’s lives, but nothing has changed for us. We want to work!” says Ahmed, a 35 year-old Muslim construction worker. His neighbor Hani, 32, a Copt and father of four, works in the informal economy “one day out of ten, on average.”

“It is the upper-middle class who chased Mubarak from power. There was no hunger riot, as one might have expected," says businessman Azer Farag. "But if such an event were to happen one day, it would be a hundred times more dangerous than what we have just witnessed.”

All rights reserved ©Worldcrunch – in partnership with Le Monde. For more translations of international articles, visit Worldcrunch.com and follow it on twitter.

Post by:
Topics: Economy • Egypt

soundoff (14 Responses)
  1. Anonymous Citizen

    I have one question. Why is this article about Egypt's economy when the US economy is not far behind it?

    May 29, 2011 at 9:04 am | Reply
    • zephae

      There's plenty of those articles elsewhere on cnn.com, so there's no need to add yet another to a foreign affairs blog.

      May 29, 2011 at 12:20 pm | Reply
  2. Alejandro Dron

    'The Brotherhood's Shortcut'
    http://www.zoharme.com
    Graphic Commentaries on the Middle East

    May 29, 2011 at 10:49 am | Reply
  3. j. von hettlingen

    “It is the upper-middle class who chased Mubarak from power. There was no hunger riot, as one might have expected," says businessman Azer Farag. "But if such an event were to happen one day, it would be a hundred times more dangerous than what we have just witnessed.”
    True, I suppose that the self-incineraton of Mohamemd Bouazizi in Tunisia sparked anger and protests in Egypt as well. The educated youngsters from the upper-middle class alone wouldn't have been strong enough to overthrow Mubarak. It was an equivocal ultimatum from all walks of life, that legitimised the demand for regime change. The military was shrewd enough not to put down these protests and now it purges Mubarak and members of the old regime, as a means to distract the people from their grievances. The next 12 months are going to be decisive for the country's future.

    May 29, 2011 at 1:16 pm | Reply
    • j. von hettlingen

      Correction – an UNEQUIVOCAL ultimatum

      May 30, 2011 at 2:51 am | Reply
  4. Alan Kamal Wood

    I am a non-jewish American with close ties to Israel. I have a home not far from Gaza and four days ago the air raid sirens went off. My nine year old step-daughter was at her drama class and came home sobbing and terrorized because she wasn't able to get into an air raid shelter. I doubt very much that if you and your family were subject to constant ongoing missile attack from your neighbors you would take a such a sanguine view of your security as you do of mine.

    On your show this morning you took a naive view of Israel's security. Yes Israel's military is capable of repulsing invasion. This doesn't mean we are secure. You indicated that Israel is remiss by not handing the West Bank over to the "responsible" Palestinian Authority. Let me remind you that several years ago Israel removed it's settlers from Gaza and handed control over to the Palestinian authority there. Our reward was a take over by Islamic militants and thousands and thousands of missiles rained down upon our civilian population. A rain that is ongoing and never makes the news on your oh so unbiased network.

    Was Israel rewarded for this withdrawal by international recognition and goodwill? Was the backfiring of this withdrawal ever acknowledged by the world at large? Was the unilateral freezing of settlements by Israel in the past two years rewarded with love on the college campuses of America or the "Arab Street" or honest negotiations from the Palestinians? The answers to these questions are an obvious no. Instead you and your guest and so many other biased and nominally educated commentators berate the Israelis for not making further concessions.

    An Israeli military withdrawal from the Westbank would be the height of irresponsibility. Instead of just the North and South being subject to missile attack the entire nation would be vulnerable. The demographic and economic heartland would be in range of daily attack. I, and the vast majority of Israelis, yearn constantly for peace. You who have known nothing but peace at home in your life can have no understanding of how deep that yearning is. The Palestinians do not want peace. They want us gone and are largely willing to exterminate us to make that happen. You may wish to ignore that truth but a truth it remains. Peace with a people who wish your extermination is not possible, and anyone who insists that the Israelis are remiss for not doing more to make peace under these circumstances is either hopelessly naive or ignorant or operating in bad faith. Which are you?

    May 29, 2011 at 1:45 pm | Reply
  5. Onesmallvoice

    In 1949 after a very long and bloody civil war,China was in the very same position Egypt finds itself in today. So Egypt needs to forget about pandering to the West and follow China's example as painful as that may be. Foreign aid from the West is and has never been enough to aliviate the national economy but just to mainly keep it afloat.

    May 29, 2011 at 2:28 pm | Reply
  6. Hakim

    When the Palestinian problem will be resolved Eygpt will have the strongest economy in the Middle East
    Right now Eygpt is taking in all the sick people from Gaza & sending all the Turkish Peace activists Rockets & Guns to Gaza which is a good start.

    May 31, 2011 at 5:45 pm | Reply
    • Jorge

      hakim..you are the living proof of everything that is wrong and evil on this planet, a direct manifestation of PURE EVIL that is islam itself, its heinous false beliefs, its pro-violent and ultra intolerant supremacist core of values that smuslims to do whatever they bwant, whenever they want to the kuffar-non-muslims, including killing, maiming,raping, lying, deceiving, blackmailing..whatever crime or evil deed there is to cummit, you muslims will proudly do with blind devotion to your sick bastard sadistic prophet and his obedient pet allah.

      June 4, 2011 at 9:19 am | Reply
  7. Jorge

    egypt is alredy bankrupt as is most od the decadent open sewer called muslim block...you had so many children that now they grew and you just can't find jobs or feed them, and what do they do in foolish desperation? emigrate to europe where they try to irrationaly turn their host countries into the islamis sh+tholes they were running away from, or become jihadist braindead criminals adn continue causing the mayhem in enslaved self-imposed oppression, making things even worse for themselves than what they already are-increasing unemployment, crime, poverty, hunger and on...and on...SC+ew sh´tzlam!

    June 4, 2011 at 9:24 am | Reply
  8. KI

    Most likely another dictator will arise from Egypt as the economic conditions cease to improve. One of the reasons these middle eastern countries do so horribly is cultural. Their population as a whole is extremely young. As we are all aware, youth cannot make rational decisions.

    June 23, 2011 at 11:48 pm | Reply
  9. buy nandrolone

    It's really a cool and helpful piece of information. I'm satisfied that you shared this helpful information with us. Please stay us informed like this. Thanks for sharing it on globalpublicsquare.blogs.cnn.com

    December 14, 2011 at 1:15 pm | Reply

Post a comment


 

CNN welcomes a lively and courteous discussion as long as you follow the Rules of Conduct set forth in our Terms of Service. Comments are not pre-screened before they post. You agree that anything you post may be used, along with your name and profile picture, in accordance with our Privacy Policy and the license you have granted pursuant to our Terms of Service.

Follow

Get every new post delivered to your Inbox.

Join 4,738 other followers