(MENAFN - Arab News) Nearly 10 weeks after Hosni Mubarak was pushed out of power, the Egyptian revolution is deterring two kinds of people it needs to help restart an economy ravaged by strikes and political uncertainty.
Tourists, whose spending on hotels, restaurants and museum tickets accounts for a fifth of the economy, have yet to return, put off by concerns about crime and violence. Investors, whom the economy needs to help create jobs and revive growth, are worried about a crackdown on Mubarak-era deals, arrests of leading business people and demands by the government to renegotiate contracts.
"This period of uncertainty has created a cloud for investors " they are reluctant to take the risks," Marwan Barakat, chief economist at Lebanon's Bank Audi, told The Media Line.
Egypt's economic woes add to the headaches of its new rulers, who are under pressure to contain inflation and create jobs while at the same time leading a delicate transition to democracy. Egyptians have used their new-found freedom to demand crony capitalists of the Mubarak era be investigated, to stage strikes and demand higher wages, and pressure the government for more subsidies, undermining efforts to steady the economy.
Last week, the International Monetary Fund cut its forecast for economic growth in the country to 1 percent, which is negative in per capita terms, from a previous forecast made last October of 5.5 percent in 2011. Egypt's finance minister, Samir Radwan, has sharply revised downward earlier estimates of the country's economic growth rate " to a more optimistic 2.5 percent to 3 percent, but low enough that he proposed Egypt seek as much as 10 billion assistance from abroad.
Meanwhile, inflation accelerated in the year to March to 11.5 percent, its highest level since April 2010, in the face of higher prices for energy and imported food, and supplies disrupted by unrest. Analysts have warned that increased government spending will fuel more inflation ahead, pressuring consumers battered by low incomes and unemployment.
Some parts of Egypt's economy continue to function, in particular the Suez Canal, whose income from tolls was up more than 12 percent in the first two months of the year, and money sent home from Egyptians working abroad, which amounts to about 8 billion annually. But tourism and investment are stumbling.
In the first week of mass protests, at least one million tourists cut short their visits or canceled reservations, Tourism Minster Mounir Fakry Abdel Noor, told The Washington Post in an interview April 16. In February, tourist arrivals were down 80 percent from the same time last year and in March they were down 60 percent, he said.
Hotel occupancy rates, which dropped to as low as 5 percent in February, have gradually risen to 25 percent to 30 percent in March, but that is less than half the rate they should be at this time of the year, Barclays Capital noted in a report this month.
The continued turmoil, meanwhile, has caused investors to pull some 8.5 billion out of the country in the two months before the local stock market re-opened for business March 23, opening up an additional conduit for capital outflow. A crackdown on Mubarak-era investors and dealmakers will give pause to those considering returning, economist said.
By David Rosenberg
