A Harsh Economic Reality in Egypt

The sitting of Egypt’s first post-Mubarak Parliament is reason to celebrate. The ability of Egyptians to take control of their political destiny, considering the constraints imposed by the SCAF and the complex electoral procedure, is a remarkable outcome.

Despite this, the economic state of ‘post-Tahrir’ Egypt is dire. Certainly, the deterioration of the Egyptian economy since 2008 contributed to the overthrow of the Mubarak regime, perhaps not so much in Tahrir Square but in the broader lack of enthusiasm for the status quo. But the uncertainty of the last 12 months has compounded this, and leaves economic issues rather than questions of, for instance, the peace treaty with Israel, as the central concern the new FJP-led government must deal with.

This was the overwhelming sentiment on visiting Cairo one year after the historic uprising. Despite sporadic protests, Tahrir is all but empty as Egyptians look forward with equal amounts of hope and trepidation.

Before January 25, 2010, the Egyptian GDP had stagnated despite some years of growth up to 2008. In addition, estimates put unemployment at 20%, with the vast majority of those unemployed aged between 16 to 25. Inflation sat in excess of 12%, probably closer to 20% on basic foodstuffs, whilst corruption was rampant.

This is a situation that has worsened in the past 12 months. In other words, a teetering economy is close to falling over into a deep recession that will be tough to emerge from. Tourism, always a key barometer of Egypt’s economic performance, has dropped by more than one-third whilst local and foreign investment is leaking out of the country, seeing its currency reserves drop by more than one-half and raising the spectre of a currency crisis that could further fuel inflation.

Whilst coverage of Egypt’s on-going transformation is transfixed on Islamist electoral success and what this means for regional stability or ‘shari’ah-isation’, these economic realities are not lost on Egyptians or their new political elites. Indeed, worries of impending food shortages and inflation have been the hottest topic in Egypt, both on the street and in the local media.

It appears that this economic question is likely to be a driver of the shifting political landscape in the coming years. Egypt needs foreign investment, but will be forced to conform to global financial regulations to ensure this, resulting in a cut to food subsidies and other services. In an environment where more than 40% of the population live in poverty, food prices and unemployment are rising, it will be the party or parties that present the most feasible and reassuring economic plan who will gain the most.

It is a set of issues that is also likely to divide parties as much as, for instance, debates over religious and personal status law or the relative powers of the new chambers of Parliament. The FJP penchant for a service-based economy will certainly resonate amongst Egypt’s poorer classes, but may also be used by international organisations as rationale for hesitating on investment. An-Nour’s economic plan is similar to that of the FJP, however with much greater ambiguity and reliance on populist language.

On the other hand, it is unclear whether the smaller ‘liberal bloc’ of parties will articulate a coherent economic policy in contrast to this, for fear of alienating themselves from the majority of the Egyptian population.

This is a rather bleak picture, to be sure, but one more reflective of the concerns of most Egyptians at the moment. It is one that also helps moderate the hysteria around an FJP-led government. Turkey’s AKP are constantly held up as an example for the FJP and an-Nour of an Islamically-oreinted party enhaincing a democratic system.

However, whilst the AKP represent the conservative sentiment dominant in Turkey, as it is in Egypt, it has been that party’s economic success that has really buttressed its popularity. Should the FJP repeat this, it will leave a fundamental imprint on this new political system for the benefit of all.