The presidential election won’t end investors’ worries about Egypt. Economic issues — corruption and poverty — were high on the list of protesters’ complaints during the Arab Spring and the subsequent uncertainty has worsened the economic position of the Middle East’s most populous nation. But the leading candidates in the first round of landmark elections on Wednesday haven’t offered many clear economic proposals.
Hardline Islamists candidates have been disqualified from the race. The field of qualified hopefuls is now led by moderate Islamist Abdel Moneim Abol Fotouh, liberal former foreign minister Amr Moussa and the Muslim Brotherhood’s official candidate Mohamed Mursi. All three support a market-leaning economy, and promise to stamp out corruption and to reform energy subsidies, which eat up 20 per cent of the budget.
Abol Fotouh and Moussa also speak of a more progressive tax system and of increased spending on health and education. Moussa is in favour of borrowing more to kick-start the economy. But it isn’t clear how these aspirations will be realised.
There’s also strong support for Ahmed Shafiq. The former air force commander, briefly prime minister during the last days of the Mubarak regime, is seen as the army’s favourite. He hasn’t said much about the economy.
In theory, Egypt could afford higher social spending without adding to a fiscal deficit forecast by the International Monetary Fund at 10 per cent of GDP in 2012 if it stamps out deep-rooted corruption and enacts subsidy reforms. The IMF’s conditions for aid typically encourage such changes.
In practice, it will not be so easy. The president’s powers have not yet been defined and may be limited by the military, which is thought to control more than one third of the economy. Corrupt practices are unlikely to disappear without a fight. And subsidy cuts, if communicated and implemented poorly or too quickly, could reignite mass protests.
Reform-minded or not, the new president will have his hands full with political questions: agreeing on a new constitution and establishing civilian rule. Investors will have to wait for financial stability.
