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Political Conflict Hurts Egyptian Economy

On many Cairo shopping streets, it's hard to tell there's an economic crisis. At a women's clothing store, however, manager Abdel Aziz Mohammed can see the impact.

“It's normal anywhere that you get affected¹ by the country's circumstances. As long as there is tension in the country, there's not much business. When the situation returns to normal, there will be nothing to worry about,” said Mohammed.

In the last two years, prices of various items are up, and so is unemployment. And with the poverty rate rising from 20% to 25%, businesses are feeling the pinch.

At the same time, foreign investment and tourism are down, and the government's foreign currency reserves have been cut in half.

“The economy is a victim of the political transition," said Political Economics Professor Ashraf Mishrif at London's King's College. "We have seen the economy is actually suffering significantly from the uprising, the protests over the last two years.”

Mishrif, himself an Egyptian, is not surprised that two years of political protests and uncertainty² have hurt foreign investment.

“The high political risk associated with the transition has really impacted negatively and led to disinvestment in the country. Some of the companies actually tried to find more a stable market to invest their capital in,” he said.

In the current political atmosphere, Egypt's new leaders have struggled to turn the economy around, announcing and then canceling tax and price increases, and postponing³ a crucial International Monetary⁴ Fund loan because they can't meet the conditions.

At the Egypt World Trade Organization Institute, a trade and investment promotion⁵ company, manager Mohammed Hesham said he believes the economy will bounce back once the political situation stabilizes⁶.

“The government has to take care of the economic side. It must. The people want economic stability and fast growth and they need a lot of jobs. This is the main duty for this government and this president.”

He acknowledged, though, that would require an easing of the tension and protests that have become a regular feature in Egypt during the last two years. The mainly Islamist supporters of the new constitution hope it will bring some stability, but the opposition⁷ has vowed⁸ to keep up the pressure on the streets as parliamentary elections approach, fearing the country will become too religiously conservative. Experts say that will make it difficult for the government to take unpopular steps on the economy, and likely will delay any recovery.