Since February 11, when the Supreme Council of the Armed Forces (SCAF) took on the task of replacing the ousted president of the Arab Republic of Egypt, Hosni Mubarak, and guaranteeing a peaceful transition, the country's economic conditions have gone getting worse. To aggravate this state of difficulty there is the condition of unfinished revolution that characterizes Egypt today and which weighs like a boulder on its unresolved socio-economic problems: widespread poverty, economic inequalities, youth unemployment, infrastructural and scholastic deficits, even compared to averages of the Arab world.
Economic growth, which in 2007 and 2008 traveled at rates of more than 7% per annum, settled at 5,5% in 2010. The political engine of this exploit was the appointment to the highest government positions of the economy of a group of experienced economists and businessmen with a solid international reputation. Their reforms aimed in particular at stimulating the financial sector, at bureaucratic simplification, at the liberalization of foreign trade and at privatisations.
Thanks also to a favorable economic situation, Egypt became an attractive destination for a significant flow of direct foreign investments which from 2,2 billion dollars in 2004 reached a peak of 2007 billion in 11,6, settling in the period 2009-2010 at almost 7 billion. A fundamental performance to maintain the role of economic and political guide between the MENA countries (Middle East and North Africa).
Other essential measures include the establishment, in 2004, of the Qualified Industrial Zones (Qiz), where manufacturing companies are concentrated which enjoy total abatement of customs duties on entry into the United States, provided their products incorporate at least 11,5 .60% components made in Israel. With the creation of the Qiz, Egyptian exports to the US grew all at once by almost XNUMX%.
Despite the statistics on gross domestic product (GDP) per capita, which went from 1.200 to 2.500 dollars in the period 2004-2010, the success of the economic reforms has however flown far from the wallet of almost all citizens. One figure above all: Egypt is in 137th place in the world ranking of per capita income, between Tonga and Kiribati. Today 40% of the Egyptian population lives on just over two dollars a day.
One interpretation interprets the underdevelopment of the Egyptian economy as a consequence of the so-called "curse of position annuities". This is an economic condition typical of the main exporters of raw materials, which according to some analysts can also be extended to Egypt. In fact, two thirds of the country's foreign currency revenues derive from oil revenues, transits through the Suez Canal, tourism, foreign aid, remittances from emigrants. With the partial exception of remittances and tourism, it is an "unearned well-being" which over the last few decades has discouraged much more beneficial productive interventions, the impact on employment of which would have contributed to balancing the economic system.
However, the economic effects of the revolt are significant from a social point of view. The Institute of International Finance (IIF) forecasts for 2011 a drop in the country's economic growth from the 5,5% originally forecast to a rate between 2,5 and 1,5%. An increase in public debt, already around 75% of GDP, by a further 10-12% is also expected. These are not bankruptcy figures, but the most dynamic components of the Egyptian economy will certainly be affected: foreign investments, tourism and construction.
According to a recent report by the IIF itself, private investors would be ready to withdraw 16 billion dollars from the Egyptian market in view of the persistence of the country's highly instable condition. Similarly, some preliminary estimates value the losses for the tourism industry at about 11 billion dollars in 2009 alone, due to the deterioration of security conditions.
The finance minister announced a budget deficit of over 2011 billion dollars for the first three months of 3, compared with a surplus of 4 billion last year.
The strategic importance of Egypt is attested by the numerous offers of intervention in support of its economy. Losing Egypt is one of Western countries' worst nightmares, led by the United States. At the summit at the end of May, the G8 countries launched the proposal for a multi-year strategic partnership agreement, designed to transform the painful signal of Tahrir Square into a path of sustainable economic and social development. The International Monetary Fund (IMF) has granted Egypt - the first of the countries in the area - an initial loan of 3 billion dollars, against a program that will allow the government to meet the costs of creating jobs work and for the protection of the poorest classes. The World Bank has announced its intention to allocate 4,5 billion dollars to finance two types of measures: those of prompt economic intervention (sort of "patches" to the public budget) and more typical project financing actions.
Despite the excellent intentions of international actors, the future course of events in Egypt will depend above all on the evolution of internal political dynamics. To date, an initial union seems to be emerging between the Supreme Council of the Armed Forces (SCAF) and the Muslim Brotherhood. The SCAF, strengthened by solid trust on the part of the population - historically in favor of the military, since Nasser's coup d'état in 1952 - is currently aiming for a difficult balance. Institutionally organic to the old regime, the Armed Forces are interested in protecting their considerable economic interests. At the same time, however, the military cannot risk a flashback of the riots, by virtue of the role of "peaceful ferrymen" that they have assigned themselves. Therefore, they are forced to a certain extent to listen and please the protest leaders, with whom they have in fact entered into a form of dialogue.
In any case, the new governors will have to remedy the country's economic difficulties and propose programs aimed at economic growth. According to some analyses, an annual growth of 7-8% would be needed to absorb the pressure of young people entering the world of work every year. The steps to be taken to improve income levels and employment rates will have to respond to market needs in the medium to long term, but in the short term it is easy to imagine that they will contribute to significantly increase the state deficit, already tested by the concessions of the last Mubarak and of the interim government. If not properly presented and managed, this economic program could arouse in the population the suspicion of facing a "Mubarakism without Mubarak" and fall under the ax of a square that now knows its strength.
*Journalist. Extract from an article taken fromlatest issue of Limes
