Morsi, Egypt Face Economic Meltdown
Feliz Imonti analyzes Egypt's economic crisis.
Morsi has put his political objectives ahead of the economic needs of the country. Now, Egypt faces an economic meltdown.
It took a mere 20% of the electorate to bring into effect the new constitution. Eighty percent of voters either rejected it or did not — for whatever reason — vote.
The obsession that Morsi had with imposing the constitution has placed him in the middle of a political minefield. Six months of street violence over the preparation of the constitution has led to the neglect of an economy that has come to a near halt. The budget deficit rose by 38%, or $13.1 billion over six months, the Egyptian pound slipped 6% against the US dollar, unemployment rose from 8.9% to 12.4% and GDP growth fell from 5.0 to 0.5%.
Added to those problems, foreign reserves were halved with the flight of capital and the transfer of savings abroad. The outflow led to the imposition of currency controls at the end of December, when reserves had diminished to $15 billion, enough to finance only three months of imports. Egypt runs a 50% trade deficit that used to be offset by earnings from tourism and remittances from workers abroad, but the tourists are staying away and economic conditions around the world make it more difficult for Egyptian workers to find employment.
