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Egypt in Turmoil
Egypt Gets Good Marks on GDP

Foreign investors and analysts give Egypt’s economic progress positive marks. The Financial Times reports today that Renaissance Capital, a Russian investment bank specializing in emerging markets, has noted Egypt’s improvement:

Stability and bold new reforms after a period of political and economic turmoil will yield Egypt GDP growth of 3.5 per cent in the year to 2015 and 5 to 6 per cent thereafter, according to Renaissance Capital.

Last week, Egypt posted GDP growth of 2.2 per cent for the year to June 2014. That is inadequate for a country with high unemployment and a youthful population. But the GDP figures also hinted at substance behind the hope that has surged through Egypt since President Fattah al-Sisi came to power earlier this year: in the three months to June, GDP rose 3.7 per cent.

As a result of these solid economic indicators, Al Arabiya reports that Moody’s credit rating agency has boosted Egypt’s outlook from “negative” to “stable.”

All of these are good signs, but, as we’ve noted before, the fundamentals of Egypt’s economic system remain dangerously weak. Egypt’s planning minister agrees. From his interview with Reuters on Monday:

“I totally agree that in Egypt we need to have an economic revolution, and a socio-economic revolution, an administrative revolution just to cope with the political revolution that we achieved in June last year,”

“The laws need to be revisited – the investment laws, the business laws. It is extremely important to understand that global competitiveness is a very challenging environment nowadays everywhere in the world. If we look at competitiveness indicators Egypt unfortunately is moving down in the rankings.” […]

“It is very important to have a growth rate at least three times the growth rate of the population. Nowadays we have a population growth rate in Egypt of more than 2.5 percent.”

This seems to indicate that Egypt’s current leaders, in sharp contrast with their most recent predecessors, are clear-sighted about the scope of the challenges that Egypt faces, and realize that Gulf money, while key in the short term, is no substitute for long-term fiscal stability and foreign investment.

In the meantime, Egypt’s political situation remains far from calm. Universities across Egypt have been holding large protests for weeks now, mostly in support of former-president Mohamed Morsi. Scores of students have been detained, and al-Ahram reports that a protest at al-Azhar today calling for the release of imprisoned students was broken up with tear gas. University student associations have long been a recruiting ground and stronghold of the Muslim Brotherhood, and subsequently all student political organizations have been banned.

While unlikely to produce any sort of counter-coup, the continuing protests underline the fact that whatever President Sisi’s economic progress, he still presides over a restive country—and one with a long way to go before its outlook can be considered promising. 

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