July 14, 2024

Egypt’s Economy Slows to a Crawl; Revolt Is Tested

The 18-day revolt stopped new foreign investment and decimated the pivotal tourist industry. The annual growth slowed to less than 2 percent from a projected 5 percent, and Egypt’s hard currency reserves plunged 25 percent.

In a region where economic woes enraged an entire generation, whether and how Egypt can fix its broken economy will be a crucial factor in determining the revolution’s success. It could also influence the outcome of the revolts across the Arab region, where economic troubles are stirring fears of continued instability, authoritarian crackdowns, or even a backlash against what had appeared to be a turn toward Western-style market reforms.

“People are angry,” said Hassan Mahmoud, a resident of a slum near Cairo. He expected a better life after the revolution, he said, but instead he was laid off from his $10-a-day job in a souvenir factory. “People in the neighborhood are talking about going back to the streets for another revolution — a hunger revolution,” he said.

With Egypt’s first open election this fall, the challenge of meeting public expectations while nursing the economy back to health has prompted a wide-ranging debate over radically divergent proposals. They include deep cuts to the bloated government work force and vast public subsidies, a leftist re-expansion of the state’s role in the economy, and the Muslim Brotherhood’s plan to impose a 7.5 percent income surtax on all Muslims to fulfill their religious mandate to give to charity. Non-Muslims would not be required to pay — a distinction that could reinforce sectarian resentments.

The Western powers are scrambling to address the growing sense of crisis by pledging a total package of $20 billion in assistance to the revolutions in Egypt and Tunisia, including debt forgiveness as well as loans from the World Bank and International Monetary Fund.

The challenge is steep. The revolution has inspired new demands for more jobs and higher wages that are fast colliding with the economy’s diminished capacity. In an indication of the desperation, the government said soon after the revolution that it would add 450,000 temporary jobs to the public payroll; an extra seven million people applied, said Ahmed Galal, a prominent Egyptian economist.

Samir Mohamed Radwan, the interim Egyptian finance minister, recently told the BBC that in his current job he felt “like a prisoner.” With European travelers still fearful of post-revolutionary disorder, only stray cats paw the trinkets in the stalls of Cairo’s ancient market. Tourism, which accounts for more than 10 percent of the economy, has plummeted by 40 percent, officials say.

Strikes by workers demanding their share of the revolution’s spoils continue to snarl industry, and business executives say the demands are becoming self-defeating. “We increased wages after the revolution, and a month later the workers went on strike again and asked for even higher wages,” said Moataz El Alfi, chief executive of Americana, which runs fast-food restaurants here.

“They beat up the human resource manager, and we had to close down the factory,” he said. “Everyone is jumping on the revolutionary wave and trying to reap extra benefits,” he added, “and it’s become chaos.”

Others say the drive to root out corruption has frozen business activity. “The main sources of capital in this country have either been arrested, escaped or are too afraid to engage in any business,” said Ahmed Habib, 29, a construction executive.

“Many of the contractors in Egypt obtained land by corrupt deals with contracts filled with question marks,” he said. “The government halted most projects to be restudied, and the banks stopped lending.”

Article source: http://feeds.nytimes.com/click.phdo?i=d5acd55014874877423cd042f6d1e636

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