Not only ill-managed
The economy was in very good shape and then came the revolution with its negative impact on foreign direct investment, tourism and Suez Canal revenues, and thus a change in fortunes took place. This is the oft-repeated story of the dysfunctional relationship between the revolution and the economy.
However, the economy before the revolution was neither in its best situation, nor is it the case that all sectors have been bleeding since 25 January 2011, according to experts gathered in a seminar organised by the Egyptian Banking Institute this week.
The seven per cent growth rate that the last Cabinet before the revolution kept bragging about was low when compared to countries like China and India whose economies grew by nine and 10 per cent, said Mohamed Fathi Sakr, professor of economics at Cairo University. He added that even the seven per cent did not last for more than a couple of years, 2006/2007 and 2007/2008, compared to 15 consecutive years of "real" high growth in the case of China.
Moreover, the main pillars of Egypt's growth were related to activities related to the outside world -- ie tourism, the Suez Canal, foreign direct investment -- which made the economy vulnerable to change in the international economy, as seen in the global financial crisis in 2008/2009 when growth reached only 4.7 per cent.
Considerably low levels of both savings and investment, together with neglecting the agricultural and industrial sectors in favour of the financial and real estate sectors, limited development and did not create enough job opportunities.
Looking through the figures related to unemployment through the last year of Mubarak's rule is sobering, says Sakr. Some 70 per cent of the unemployed were youth in the age group of 15-29 years old, and 30 per cent of them hold university degrees. Some 26 per cent had been employed before and were laid off.
Ahmed Ghoneim, also professor of economics at Cairo University, highlighted that on the contrary to what has been said -- that it is the open market and liberal policies that led to social unrest and led to the revolution -- the wrong application of free market and liberal theories exacerbated matters.
"In theory, the state has a role to play in open economies, but the prevailing corruption limited the role of the state," according to Ghoneim.
Amid a politically and economically corrupted scene, the social safety net developed many holes. From here came the role of religious groups, whether Islamic or Christian. Their social role paved the way to their political presence thereafter, lamented Ghoneim.
Then came the revolution and again it was mismanagement that sent most economic indicators south.
"Look at the messages conveyed by statements given by members of the Supreme Council of the Armed Forces [SCAF] or the Cabinet. It could destroy even a strong economy, let alone one in political upheaval," he said.
When a minister makes hard-to-achieve promises like employing thousands of temporary workers and raising wages this affects confidence in the government.
Ghoneim adds that the unjustified decision of SCAF in May 2011 not to borrow money from the IMF not only gave the impression that the government does not know what it is talking about, but also wasted an opportunity to get things back in shape earlier.
Furthermore, flirting with Tahrir since the revolution, the government seemed to put social justice ahead of real reform of the economy.
For his part, Sakr lightened the gloomy picture by underscoring three economic activities that achieved gains after the revolution. First is the Suez Canal, with revenues jumping 11.3 per cent in 2010/2011 compared to a year earlier.
Remittances, as is expected in the times of problems, when expatriates move to transfer more of their money back to their home countries, grew by 25.6 per cent in 2010 /2011 compared to its level in 2009/2010. Moreover, non-oil exports gained 9.1 per cent to reach $14.1 billion on the back of exporters, especially in the textiles and readymade garments sectors, lowering prices in international markets.
Both experts see the coming phase as vague. While there is a tendency to adopt the "liberal" way of economic thinking, the word liberal is very elastic.
Experts believe we should expect lower growth rates after the revolution. More important is to focus on the quality of growth and the sectors contributing to growth.