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Egypt poll could affect economic crisis

The economic crisis in Egypt could be made worse by the polarising elections.

Supporters of Mohammed Mursi, the Muslim Brotherhood's candidate in Egypt's presidential election, pray during the party's last campaign rally for Egypt's presidential election, in Cairo on May 20, 2012. Picture: AFP

CAIRO - The success of two polarizing figures in Egypt's presidential election could make it harder to put in place an effective government that can tackle an economic crisis and secure vital foreign aid.

No centre-ground figure made it to next month's run-off vote, setting up a showdown between the Muslim Brotherhood's candidate, Mohamed Mursi, and ex-army man and Hosni Mubarak's last prime minister, Ahmed Shafiq, two symbols of opposing political forces whose rivalry has caused months of policy paralysis.

Protesters threw petrol bombs at Shafiq's campaign headquarters in Cairo late on Monday, incensed that a figure so closely associated with ousted leader Mubarak now had a strong chance to replace him as president.

The army generals who took power from Mubarak have promised to hand over to the new president by July 1 and many Egyptians are hoping for a unifying figure who can end political turmoil, restore security and revive a struggling economy.

"After the outcome of the first round, we are much more bearish," said an economist at a major foreign bank, who did not wish to be identified. "We see a lot more instability, but the major risk is the long-term outlook. This result does not unlock the situation."

Last year's uprising saw off tourists and foreign investors, two of Egypt's main sources of foreign currency, and economists say the country will need a minimum of $11 billion over the next year to stave off a balance of payments crisis and a potential devaluation of its currency.

The winner of the run-off on June 16 and 17 will need to inject new vigour into efforts to secure funds from foreign donors, including the IMF, as a stop-gap until the economy recovers.

But both candidates could struggle to win the broad political backing needed for effective government.

Shafiq is campaigning as a strong, military man who will force order upon a country still suffering from the mayhem sparked by Mubarak's overthrow, an image that makes it hard to win over the political class set free by last year's uprising.

The Brotherhood's Mursi is trying to rally supporters of candidates knocked out in last week's first round to help block Shafiq from the presidency. However, he faces suspicion from liberals and revolutionary groups who see the movement as hungry for power so it can impose a conservative social agenda.

"All this could delay things further and could mean this limbo in policymaking will continue," said Karin Maree of the Economist Intelligence Unit.

A win for Mursi would usher in a Brotherhood-dominated government that would have a much easier time working with the Islamist-dominated parliament, perhaps helping to push through economic reforms the International Monetary Fund wants before releasing a $3.2 billion loan.

A win for Shafiq implies more of the institutional deadlock that left the army-backed interim government lacking the authority to push through meaningful reforms.

Some business leaders in Egypt say they would still welcome a Shafiq presidency because of his past government experience and his commitment to making the country secure again.

"The problem affecting tourism was not political instability but security," said a travel company executive, who did not wish to be named. "People will accept whoever is elected as they know it will have been a fair vote, though there may be some unhappiness at the beginning."