STOCK MARKET WATCH, Monday, December 12, 2011

[xchrom]

51. Why Egypt's Economy Matters

http://www.theatlantic.com/international/archive/2011/12/why-egypts-economy-matters/249718/

The economy was an important cause of Egyptian President Hosni Mubarak's overthrow. The Mubarak regime failed to deal with poverty (20 percent of the population), unemployment (more than 10 percent), lack of opportunity for a bulging youth cohort (90 percent of the unemployed were between 15-24), inflation (about 12 percent in total consumer prices, with food higher), and widespread corruption.

Since Mubarak's departure, in February, the Egyptian economy has significantly worsened, with the military leaders failing to address the burgeoning issues.

GDP growth, which had averaged about 5 percent per year at end of the last decade, is likely to be little more than 1 percent, if that, in the current fiscal year. There is a looming currency crisis, as Egypt's reserves have declined from $36 billion at the beginning of the year to $22 billion in October, with a projection of $15 billion in January. Tourism, which traditionally accounts for one in seven jobs, is down by 35 percent. Rich Egyptians have taken their money elsewhere, and foreign direct investment has dried up as lawlessness and uncertainty have spooked business. The stock market index is down more than 40 percent.

Rates of poverty, inflation, and unemployment are higher today than they were at the time of Mubarak's downfall. Fully 44 percent of all Egyptians are categorized as extremely poor to near poor, according to some estimates. At a recent conference of leading Arab financial institutions, Joseph Torbey, chairman of World Union of Arab Banks, summarized the situation in Egypt by warning, "The Arab Spring will become a rough economic winter."