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.

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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.”

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“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.”

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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.

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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.

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Topics: Economy • Egypt

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