Mursi ouster hastened by failure to grow country's economy

The rage that helped topple Egyptian President Mohamed Mursi was nurtured by the Arab Spring's failure to deliver the green shoots of economic recovery.

Egypt's military removed Mursi from power on Wednesday, suspended the constitution and announced an early presidential election in a bid to resolve the nation's political crisis. A technocratic government will be formed and the head of the Supreme Constitutional Court will be in charge of running the country's affairs, Defence Minister Abdelfatah al-Seesi said in a televised broadcast.

With growth already the weakest in two decades, unemployment stands at a record 13.2 per cent. The mounting risk is of a vicious circle in which the street clashes that left at least 18 dead within one day alone and a political vacuum drive the economy deeper into a slump during the transition period. That threatens foreign investment, tourism and the chances of an International Monetary Fund aid package.

"We don't want to see a power vacuum going on for a long time," said Rami Sidani, a Dubai-based money manager at Schroder Investment Management, which holds Egyptian stocks. "Despite the celebrations, it remains a coup led by the military, which puts international support at risk if power is not handed over in in a timely manner." He spoke by phone on Thursday.

Egypt's benchmark bonds rose from a record low and EFG-Hermes Holding SAE said stocks may gain. The benchmark EGX 30 stock index plunged 12 per cent in June.

Falling knife?
Investors "want to see what's going to happen before they come back to the market," said Samer Mardini, Dubai-based vice-president of fixed income at SJS Markets Ltd. "When the knife is falling no one has the power to catch it."

A May report by the United Nations said poverty and food insecurity had jumped in Egypt over the past three years. It estimated 17 per cent of the population struggle to secure enough food, up from 14 per cent in 2009. The malnutrition rate has risen to 31 per cent of children under five, up from 23 per cent in 2005.

Unrest isn't limited to Egypt: The cities of emerging markets from Turkey to Brazil witnessed riots in recent weeks before dying down. Unemployment in Turkey was 10.1 per cent in March, while Brazil's was 5.8 per cent in May.

It is nevertheless in Egypt where the recent clashes have been the most violent, two years after Mursi came to power following a mass uprising that ousted Hosni Mubarak. The country's first democratically elected civilian leader took office promising to attract outside investment and reduce unemployment below 7 per cent by 2016.