By: Lamia Nabil
Political turbulence is slowing the economic recovery in Egypt, according to an Oxford Business Group (OBG) report which has expressed pessimism regarding the outlook on the Egyptian economy for 2013.
GDP growth fell by 0.7% year-on-year and the unemployment rate currently stands at 13%, with the inflation rate at 11.1%, according to an Information and Decision Support Centre (IDSC) governmental report.
The Heritage Foundation’s 2013 Index of Economic Freedom gave Egypt a 54.8 rating, currently ranking it as the 125th freest in the 2013 Index of 179 countries. Its overall score is 3.1 points lower than last year, reflecting declines in seven of the 10 economic freedoms measured, especially investment and labour freedom.
Egypt is ranked 13th out of 15 countries in the Middle East and North Africa region, and its overall score is below the world and regional averages.
Recent civil disobedience and sit-ins have threatened to further worsen Egypt’s currently flagging economic environment.
These calls had recently escalated and threatened to disrupt business, as protestors tried to evacuate government buildings in several governorates.
“The civil disobedience is understandable,” said Chairman of 6th of October Investors’ Association Magdy Abdel Moneim. “But it has had a negative effect on Egypt’s business environment; especially on local investments which affect around 50 million workers.”
“There are at least 300 small and medium sized factories that have closed during the past period as a result of negligence by the Ministry of industry,” he continued.
During President Mohamed Morsi’s televised interview this morning on the independent Mehwar television channel, the president revealed that he had given orders to allocate EGP 400m to the Canal provinces, as well as assigning an investigative judge to look into the recent clashes in Port Said, and also to restore the city’s free zone which was closed in 2002.
“Despite the government’s promises of incentives for local investors,” continued Abdel Moneim. “We need to really need to see more actions and less talk.”
“Foreign investment is dwindling due to this unrest,” he said. “The gap has widened between Egypt and the world and foreign investors currently do not have enough trust in Egypt’s business environment.”
Ahmed Al-Otefi, director of investment management division at Roots Holding for Financial Investments, said that despite the negative indications for the economy as a result of the civil disobedience, the stock market is yet to truly feel the effects, as it is rarely affected by other unrest from provinces.
He did warn, however, that in the long-run these continued protests and sit-ins will affect listed companies especially those that have branches in governorates experiencing the unrest.
“We have to pay more attention to the seriousness of the possibility that if this continues, the stock market may be closed once again. The current government seeks to benefit from the stock market through trading duties and IPO fees, more so than paying attention to investors.”
“Currently politics control the economy, not the civil disobedience,” said financial expert Osama Murad. “In fact, it is negligence by the presidency that is the primary reason for this.”
“After 30 years of negligence and corruption, Port Said residents are well within their rights to stage such sit-ins,” he continued.
He further accused the current government of trying to remain in power and the opposition of attempting to manipulate public opinion, “whilst simultaneously not involving the people”.
“As long as there is no community involvement,” he continued, “there will be mobilisation on behalf of disaffected people in order to express their rights. The economy will continue to deteriorate, especially after the next elections, which will be held over four stages for the first time in Egypt.”
“They [the government] have to take actions to remove congestion; they have to pay attention to the gravity of the situation,” he added. “If not, the economy will collapse in a matter of weeks.”