Egypt's economy at a crossroads (page 1 of 2)

The January 25 revolution has lifted Egypt to the forefront of the Arab thirst for democratic and economic reforms. The path to Misr al-Jadid, the New Egypt, offers opportunities but has its challenges.

The daily newspapers are writing more openly than in any other Arab country, with the exception of Lebanon. Young people are expressing a new spirit and growing confidence in their country.

A now-or-never mentality has replaced the depressed mood which once prevailed under former President Hosni Mubarak. The peoples' trust in the Egyptian army has never been stronger: when pedestrians pass tanks and military guards at government buildings, they wave or even bring them flowers. Life is back in Cairo.

Since February 11, when Mubarak stepped down, a military interim government has taken over power in Egypt. Field Marshall Hussein Tantawi promises a smooth transition into a democratic Egypt, although the 1981-installed marshal law has not been lifted as yet (meaning anybody can be arrested by the police without legal basis or court ruling).

In mid-March, the vast majority, some 77%, of Egyptians said yes to a new constitution, another step to a democratic Egypt. Some 44% of registered voters went to the polls.

This was a much higher participation than during the Mubarak reign which lasted from 1981 till February 11th 2011. Meanwhile, interim leader Tantawi set September 2011 as the date for the next parliamentary elections.

Revolutionaries demand their dividend

But while the Egyptians attained a much-awaited political dividend, a second look at the status quo reveals that the economic dividend will be much more complex to achieve. With some 82 million people, the Arab Republic of Egypt is the largest country in the in North Africa.

Bureaucracy and a lack of jobs in the blue and white collar sector put an immense burden on its social stability. Young Egyptians still demonstrate almost on a daily basis at Cairo's famous Tahrir square in the heart of the city.

While Egyptian bread still costs one Egyptian Pound (17 US-Cent), other food prices increased by over 20% year-on-year. Since the start of the 2011, the Pound lost 5% against the greenback (one US-Dollar currently buys 5.98 Egyptian Pounds). Citigroup expects the domestic economy to grow only by 1.4% in 2011 after 5.1% in 2010.

"On top of this, we have seen a meltdown in tourism in February, which lasted until mid-March," says artist Mohammed, who runs a small shop for paintings and pyramid souvenirs between the Ramses Hilton Hotel and the Tahrir square. "For over six weeks we had no customers", he says.

"Tourists pour in step by step, but the situation remains tricky," taxi driver Ahmed confirms. "What we need now is jobs, jobs, jobs...," he adds. "We the young generation ousted the Mubarak clique, of course we want now to be rewarded for that and have a better life for our families."

Economists estimate that the economy has lost some $20bn due to the temporary standstill triggered by protests and the consequent power vacuum. A fifth of the country's foreign currency reserves, estimated at $34bn (down by $2bn compared to the pre-revolutionary time) is based on the travel and tourism sector.

In order to cut losses, Egypt Air has put much of its fleet on lease and has slightly modified its summer schedule. Cairo International Airport is not only a destination for holiday passengers, but an important hub, linking Africa with Europe and Asia.