Egypt's gloomy economy: false hopes and the undeniable truth

Since the middle of November, economists and analysts everywhere have been waiting for Egypt's data for first-quarter gross domestic product (GDP) of the fiscal year 2015/2016, but the Egyptian government said that this data is still being prepared.

Usually, the Egyptian ministry of planning announces GDP data for first-quarter through mid-November. Two months have passed and nothing has been announced yet.

Wise men say that hiding the truth is lying. In this case it is hard to give the Egyptian government the benefit of the doubt. In the latest IBP's transparency index on Egypt, that was released a few months ago the country was ranked 16th out of 100. This score is substantially lower than the global average score of 45.

The lack of transparency, however, is not the only reason why, even though the status of Egypt's economic growth looks so dim, it is not clear how much so.

Under the growing polarization and the tense climate of intimidation towards any opposing voice that dares to say that the emperor is naked or at least question the quality of rags covering his body, the Egyptian NGOs, and even investment banks that have their own research houses, find it hard to go public with their estimations of the fate of state's economic policies, not to mention their predictions of the future.

One example of the witch-hunt campaign towards critical voices is how the supporters of the state went as far as calling anyone who rose objections to the timing or efficiency of the Suez Canal expansion “a traitor” without giving them a chance to explain their doubts.

Even when the head of the Suez Canal Authority, Mohab Mamish, went as far as announcing the 2015 Canal revenues in local currency as an attempt to show an untrue raise, no one laughed openly at the joke. Everyone knows that the Canal's revenues have been dropping in the last 11 months. Infact Suez Canal registered revenues of $5.2 billion in 2015, down by 5.3 percent, despite the opening of its new extension in August 2015.

The American writer Rex Stout said more than 100 years ago that “there are two kinds of statistics, the kind you look up and the kind you make up”. One might add, in the Egyptian case, the statistics that you make up and no one believes.

So, the questions that have been raised about Egypt's GDP forecasts are legitimate. How does the Egyptian economy really look like in the first half of the fiscal year that ended in December? This is not an easy question to answer but connecting the dots can at least shed some light on a much needed answer.

Last May, the government expected GDP growth to rise to more than five percent in the FY 2015/2016. Egypt's economic growth in all quarters of the FY 2014/2015 has been 4.2 percent, compared to the 2.2 percent rate registered previous year.

However, since then a lot of water flowed under the bridge. Egypt’s economy has been hit by a series of interlinking problems that show few signs of reduction.

According to figures released by the Trade and Industry Ministry, Egypt's non-petroleum exports dropped 14.5 percent in the first five months of 2015/2016, to US$6.97 billion, compared to $8.15 billion in the same period previous year.

Business activity in Egypt's private sector, excluding petroleum, shrank in the fourth quarter of 2015 with modest declines in output, exports, and employment, Purchasing Managers’ Index (PMI) survey showed last week. Egypt's PMI index came in average 46.8, the lowest number since third quarter of 2013. Any reading above 50 indicates expansion and below 50, contraction.

The World Bank has cut its outlook for Egypt’s growth in fiscal year 2015/16 to 3.8 percent, from 4.5 percent in June, due to the tourism sector weakness, according to the World Bank’s January 2016 Global Economic Prospects report. The report explained that the cut comes as "the tourism sector weakens following the October plane crash in Sinai and a foreign currency shortage persists for at least part of the year".

Egypt's tourism revenues have dropped by 15 percent in 2015 to $6.1, down from $ 7.5 billion in 2014 according to tourism ministry. This comes amid Russia and UK suspending their trips to Egypt after a Russian plane crash in October over Sinai leaving the once crowded Red Sea resorts, mainly Sharm El-Shiekh, nearly empty.

"Gloomy news continues to emerge surrounding Egypt’s economy.. The situation has taken a turn for the worse in recent months as a precarious security and political situation has exacerbated underlying economic weakness" said Spanish economic research agency, Focus Economic, in a new report released last week.

In addition, the agency expects foreign currency shortage to result in more inflation which will accordingly lead to lower real GDP. Moreover, the foreign currency crisis, that has been strangling the economy, will limit the government’s ability to spend on megaprojects earlier announced, Focus Economic says.

Without doubt, Egypt's economy is facing an undeniable crisis, as we have already seen a tremendous amount of global financial turmoil that is not getting any better with the uncertainty about the fate of the economy in China.

Whether the government admits it or not, people do not need numbers (not to mention false numbers) to know that their lives are not getting any better, but in fact is going from bad to worse. Hiding the numbers or trying to go around them on way or another will not make the looming recession disappear.  

Hope is a good breakfast but a bad supper; false hope is bad at all times.


Ibrahim Alsahary is an economist and former executive chief editor of Egypt Independent.

Opinions expressed in this article remain those of the author and do not necessarily represent those of The New Arab, its editorial board or staff.