Skip to main content

From hope to despair: Egypt slides into economic uncertainty, again

By John Defterios, CNN
July 8, 2013 -- Updated 1701 GMT (0101 HKT)
STORY HIGHLIGHTS
  • Egypt's budget deficit and unemployment continue to rise as growth slows.
  • Egypt grew above 5% before the revolution, the economy barely growing now
  • Foreign reserves dropped just over a billion dollars in June to $14.92 billion

Editor's note: CNN's John Defterios is CNN's Emerging Markets Editor and anchor of Global Exchange. Watch the Sunday to Thursday 1900 UAE and follow him on Twitter.

(CNN) -- The euphoria that greeted the transition to military rule in Egypt and prompted a 12% rally in three days last week has quickly faded. Five days into the military's rule in the country's second revolution and the transition is looking as messy as the first time around.

Protests in support of Mohamed Morsy, and subsequent killings and injuries that have taken place, will make it even more challenging to stabilize the most populous country in this region.

Read more: A week of upheaval in Egyptian politics

Now the difficult financial work begins. The governor of Egypt's central bank, Hisham Ramez, came to Abu Dhabi Sunday for private meetings but he tried to fly under the radar.

Can Egypt's economy stabilize?
Egyptian tourism suffers during unrest
Fareed's Take: Understanding Egypt

Details were in short supply, but officials here say a high level UAE delegation will be going to Cairo to continue talks. The subject, no doubt, must be short term financing.

According to the central bank, foreign reserves dropped just over a billion dollars in June, to $14.92 billion. That is a three month supply of capital, with the bulk coming from wealthier neighbors, notably Qatar, Saudi Arabia, Turkey and Libya.

The UAE pledged $3 billion shortly after the ouster of Hosni Mubarak in 2011, but just three months ago the government said it will take more time before the money is delivered.

Egypt unrest: 5 key questions

There is a mix of political and economic factors to consider, as is often the case in the Middle East. Qatar was an early mover in support of the Muslim Brotherhood and provided $7 billion of the funding in transition.

Saudi Arabia and the UAE were among the first nations to come out with statements of support after last week's power play by the military and they are eager to see the situation stabilize.

Talks with the International Monetary Fund have hit roadblock after roadblock since Mubarak was toppled from power.

President Morsy held a series of meetings in Cairo and Washington, but by the close of 2012 he did not have the political support from the opposition to try and drive through cuts in fuel and food subsidies that the IMF wanted to qualify for a $4.8 billion loan.

Egypt's Adly Mansour: Interim president, veteran judge, mystery man

In the meantime, the budget deficit and unemployment continue to rise. Both are running about 13% and continue to rise as growth slows. Egypt was growing above 5% before the revolution, but the economy is just barely growing.

The government is earmarking growth of 2% this year, but that is looking ambitious considering what is happening on the streets of Cairo and other major cities.

The January 2011 uprising was driven in part by those who felt locked out of opportunity by the Mubarak government and many complain life did not improve in the year Morsy had the reins in his hands.

CNNMoney: 9 insights for Egypt's new rulers

A quarter of the population still lives on less than $50 a month and about a quarter of the youth are without a job, according to the International Labor Organization.

After the attacks on pro-Morsy protestors in Cairo Monday, the Al Nour party, representing the more conservative Salafis, said it will pull out of talks to find an interim leader.

This will make it difficult for General Commander Abdel Fattah al-Sisi and the new technocratic interim president he appointed, Adly Mansour, to achieve a timeline to transition of six to nine months.

ADVERTISEMENT
Part of complete coverage on
October 9, 2014 -- Updated 0804 GMT (1604 HKT)
Liberia, Sierra Leone and Guinea -- the three countries facing the biggest health crisis -- are also facing huge bills to try and contain the virus.
September 22, 2014 -- Updated 1316 GMT (2116 HKT)
Twitter has lost its position in the top 20 coolest brands for the first time in three years.
September 25, 2014 -- Updated 1554 GMT (2354 HKT)
As the crisis in Iraq escalates, CNN looks at how Iraq could crack down on ISIS' oil riches under the guidance of its new oil minister, Adel Abdul Mahdi.
August 29, 2014 -- Updated 0842 GMT (1642 HKT)
Recep Tayyip Erdogan is Turkey's new president . So can he revitalize its economic fortunes?
September 19, 2014 -- Updated 1724 GMT (0124 HKT)
Experts share their tips on cities they see as emerging financial hubs...they're not where you think.
October 9, 2014 -- Updated 1511 GMT (2311 HKT)
Growing numbers of us are willing to serve as bank, teacher or travel agent to people we have never met, and entrust them to serve us in turn.
August 28, 2014 -- Updated 1244 GMT (2044 HKT)
The European Union is stepping in to save its dairy from going sour.
August 18, 2014 -- Updated 1236 GMT (2036 HKT)
Europe's deteriorating relationship with Russia has hit the region's growth, even before new food sanctions begin to bite.
July 16, 2014 -- Updated 1634 GMT (0034 HKT)
With cyberattacks on the rise and here to stay, it's a modern-day challenge for people and businesses to get smarter about preventing them.
August 14, 2014 -- Updated 1324 GMT (2124 HKT)
Airstrikes, rebels seizing control of oil fields, plus a severe refugee crisis are a recipe for market panic. So why are Iraq oil prices stable?
September 19, 2014 -- Updated 1124 GMT (1924 HKT)
Peer-to-peer finance lets businesses bypass bank loans. Creative companies with quirky ideas find new lending models advantageous.
July 20, 2014 -- Updated 1524 GMT (2324 HKT)
Evidence points to pro-Russian separatists as perpetrators of the attack and Vladimir Putin is facing questions, David Clark writes.
September 3, 2014 -- Updated 0952 GMT (1752 HKT)
CNN's Jim Boulden looks on the future of online shopping.
August 5, 2014 -- Updated 1440 GMT (2240 HKT)
The biggest Ebola outbreak in history is taking its toll in Western Africa, hitting some of West Africa's most vulnerable economies.
ADVERTISEMENT