Egypt: After the Nile Revolution

Ayah El Said, an analyst at Roubini Global Economics, points out that “significant political developments have occurred, such as the creation of new political parties, the constitutional referendum vote, dissolving the National Democratic Party and announcements by key figures of their plans to run for the presidential election - most notably Mohamed El Baradei and Amr Moussa.”

But she warns that “The transition will be messy if things continue at their current pace, with dire economic repercussions which could further hamper the transition phase.”

“Egypt is facing sectarian flares, and labour strikes continue to hamper economic activity. Ongoing embezzlement investigations of former ministers and business leaders may provide a glimpse of accountability, but the uncertainty is adding to investment risks and is keeping the masses sidetracked from focusing on the upcoming elections.”

“The Muslim Brotherhood may be among the few ready to go through the process of parliamentary elections, and while a lot of people remain afraid of the Muslim Brotherhood, more calls may be made to the Supreme Council of the Armed Forces (SCAF) to continue to hold the reigns of the country. The political uncertainties are adding to the economic stall by deterring investment. This means Egypt’s quest for global funds is imperative.”

Anthony Skinner, Associate Director of Maplecroft, says that Egypt finds itself at the cross-roads of its political future. “With general elections scheduled for September, the Muslim Brotherhood’s Freedom and Justice Party is well positioned to secure a strong, if not dominant, presence in parliament,” he says.

But he adds, “Concerns persist that secular activists and politicians do not have the experience or time to mobilise support in the elections. Secular Egyptians and members of the Coptic community remain preoccupied by the Muslim Brotherhood’s political orientation and ambitions, although it is not a monolithic organisation but rather consists of liberals, moderates and staunch religious conservatives.”

“Meanwhile, the Supreme Military Council continues to face criticism for failing to make decisions on Egypt’s political transition in a transparent manner. Yet, it has not hijacked or stalled Egypt’s political transition.”

“Inter-faith violence, the emergence and provocation of Salafists, and a spike in criminality and a lack of security are risk areas. The potential of the economy is undeniable. But Egypt is losing approximately US$1bn per month from lost tourism receipts and industrial production is at 50% capacity. Concerningly, foreign reserves have plunged to US$28bn from US$36bn in January.”

Hani Sabra, an analyst at Eurasia Group

, argues that Egypt is experiencing a political renewal. “In the medium and long term Egypt will likely succeed in creating a functioning, if imperfect democracy. Political parties are forming and public debate and discussion is more robust than it has been in decades.”

But he adds: “In the short-term, the political situation will become increasingly tense ahead of planned September parliamentary elections. The supreme military council is facing growing criticism that it is moving too slowly against those who perpetrate and commit sectarian violence, prompting some commentators to posit the unlikely scenario that the military is turning a blind eye to the violence in order to use it as justification to seize more overt power.”

“In addition, the lack of clarity about the timing of the transition is causing political tension. Parliamentary elections are scheduled for September, but there is no exact date. Neither is there a date for the presidential election or a timetable for when a new constitution will be written. These issues matter. The uncertainty is making it tougher for the economy.”

A version of this article first appeared in Euromoney Country Risk. Euromoney Country Risk is an online service from Euromoney dedicated to sovereign and country risk.