By Andrew Bowman and Rob Minto
This weekend sees large protests in Egypt against president Mohamed Morsi on the second anniversary of the revolution which toppled Hosni Mubarak. Two years on, where has Egypt got to? These four charts provide an insight.
Investor sentiment, as reflected in the EGX30 stock market index, shows that the market is still a long way from the 7,000+ level seen in 2011. With trading suspended during the tumult of the revolution, the market fell off a cliff in early 2011. You might have heard that Egypt was one of the best performing stock markets in 2012, but the chart puts that in context – it started 2012 from its lowest point since the revolution.
Source: Bloomberg
Inflation has fallen since the revolution, but as Capital Economics points out, this is in large part down to the government holding down the prices of food staples and fuel via subsidies, which shield citizens from changes in import prices. This may not last: the IMF want the Egyptian government to cut fuel subsidies before it releases the long-awaited $4.8bn aid package, and there is also the matter of Egypt’s deteriorating foreign exchange reserves.
Source: Bloomberg
As the chart below shows, post-revolution, Egypt began burning through its foreign currency reserves as the central bank attempted to manage the value of the Egyptian pound close to 6 to the dollar. An expensive business. The decline bottomed out in late 2012 as reserves reached levels sufficient to cover only three months of imports – a critical level.
Source: Bloomberg
The central bank continued to support the pound after this, helped along by aid from wealthy governments in the gulf. However, with confidence in the Egyptian economy draining as fresh protests erupted over the constitution, the pressure on the pound increased. The Egyptian central bank changed its approach in late December to a managed decline of the pound via regular dollar auctions and the pound began dropping sharply in value against the dollar, as the chart below shows.
Source: Bloomberg
http://blogs.ft.com/beyond-brics/2013/01/25/post-arab-spring-egypt-in-four-charts/#axzz2IaAAxVLj
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