CAIRO: In lead-up to the presidential elections, the economy has mirrored the nation’s political standstill amid ongoing instability, which has scared off a number of investors and lead many to wait for the next head of state to be chosen before making any move.
The political situation and poor exchange rate between the U.S. dollar and Egyptian pound have exacerbated economic challenges facing traders and businessmen, who were hoping this year would compensate for the last three years’ losses.
The value of the Egyptian pound has fallen about 20 percent against the dollar since the 2011 revolution that ousted former president Hosni Mubarak; a dollar now sells for around 7.12 Egyptian pounds, and was selling for 5.82 in 2011.
“The real estate market is witnessing a sharp recession as nine days remain before the upcoming presidential election,” head of Zayed Company for Real Estate marketing services Mohamed Zayed told The Cairo Post, adding that people are not willing to buy new houses until real estate prices settle after the end of the elections.
Meanwhile, the consumer price index (CPI) of the Central Bank of Egypt (CBE) noted a 0.68 percent increase in monthly inflation to reach 9.82 percent compared to 9.76 percent during the same period in February, CBE’s statement said. The CBE attributed the increase in inflation rates to an increase in the price of goods.
Zayed added that the “market has seen a decline in buying and selling since Egypt’s January 25 Revolution, which means the market demand for real estate was affected by changes in the economy, prices and also by the ongoing political instability.”
“The real estate market has been almost completely paralyzed in the wake of the events that Egypt has witnessed during the past three years,” said real estate broker Abdel-Hameed Sakr, adding that there is a high expectation that the market will recover following the presidential elections.
Finance minister Hany Qadri Dimian said May 16 at a London investment press conference that Egypt could take advantage of global bond markets after the end of the presidential elections, adding that the political turmoil following the January 25 Revolution has “hammered the economy of 85 million people as foreign investors and tourists have fled.”
There is a “severe recession” in the automotive market amid rising domestic political tensions in Egypt, according to Effat Abdel Atty, a member of the Cairo Chamber of Commerce.
The trade deficit declined 21.4 percent to hit 18.04 billion EGP (U.S. $3.38 billion) in December 2013, compared to 22.95 billion EGP in December 2012, the Central Agency for Public Mobilization and Statistics (CAPMAS) announced on March 24.
Atty told The Cairo Post Friday consumers’ purchasing decisions are affected by several factors such as the dates of elections, exams and the security and economic situation.
Egypt’s Automotive Marketing and Information Council (AMIC) estimated total auto sales fell by 33 percent a year after the 2011 revolution.
The automotive market could recover as much as 50 percent following the elections, Atty predicted, adding he foresaw Egypt embarking on a gradual purchase-driven economic recovery.
“Moving towards stability will encourage customers to purchase products and stocks as well as convince investors that the economy will be stronger and profits higher in the near future,” Atty said.
“Although the market in this period is not in its best condition, I believe that the frequent elections and referendums that we’ve experienced in Egypt during the past three years can change the consumer’s purchasing decisions,” said Farag Abdel-Fattah, a professor of economics at Cairo University. He told The Cairo Post the period before presidential elections is supposed to witness a “meaningful recovery,” in which each candidate tries to promote himself through his electoral campaign.
Campaigns always include numerous promises by the candidates to set a maximum wage for public-sector employees as well as to launch several projects. This could promote a speedy recovery and also encourage investment in Egypt, Abdel Fattah said.
Stock market indexes witnessed a significant rise at the beginning of the first trading session, a few days ahead of the country’s draft constitutional referendum, Vice Chairman of the Financial Securities Division at the Federation of Chambers of Commerce told Youm7 Dec. 15, attributing the rise to interim President Adly Mansour announcing that the draft constitution would be offered for public referendum on Jan. 14-15.
Egypt’s stocks recorded over $1.19 billion in gains as the benchmark EGX30 rose by 2.83 percent and the broader EGX70 by 3.99 percent, just a few days ahead of the country’s constitutional referendum written by an Islamist-dominated parliament under Morsi’s rule, and ratified in December 2012.
“I believe that many investors would say it is more stable now so my investment will be much safer,” Abdel-Fattah said.
He also said the Egyptian market has long suffered due to political instability, and that the increase in prices was also affected by the U.S. dollar exchange rate and the poor security situation in the country.
The Egyptian Exchange indexes declined, however, when Sisi submitted his official resignation from the military March 26 to announce his presidential bid. On March 28, market capitalization lost 3 billion EGP ($400 million), reaching 487.4 billion EGP, compared to 490.4 billion EGP a week before Sisi’s announcement.
“The Egyptian tourism industry has been hit hard since the start of the January 25 Revolution,””Elhamy El-Zayat, Chairman of Egypt’s Federation of Tourism Chambers (EFTC) told Al-Masry Al-Youm Friday.
Sisi, the heavy favorite to win the election, has a “good view of the tourism sector and its important role on the national economy,” Zayat added.
Secretary of the Building Materials Division at the Cairo Chamber of Commerce (CCC) Abdel Aziz Qasem told The Cairo Post that buying and selling were not affected by the elections, saying that the sales of building materials are “near normal.”
Egypt’s economy will not be recovered unless the next president launches new projects and achieves stability, he added.