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Monday, February 11, 2013

Egypt's economy quickly going downhill

From Egypt Independent yesterday:
As the country’s economic crisis continues to administer its blistering effects on businesses and consumers, industry insiders and experts are saying the country still has yet to bear the brunt of an economic downturn that has no real relief in sight.

If the government continues down its current path, and hopes for loans from international foreign institutions remain unattainable, such as Egypt’s US$4.8 billion loan from the International Monetary Fund, experts have repeatedly warned that the situation will become drastically worse. When it does, they predict the real effect of the crisis will come in a tsunami of price increases that could spark social unrest.

A net importer of food and consumer goods, Egypt relies heavily on foreign supplies imports to feed its growing population.

But retail and import sources are warning that the ongoing devaluation of the pound will lead to large price raises in the immediate future, especially those of imported products. These price raises, experts say, will shock the Egyptian economy and drive it into further crisis.

A source from a leading mass retailer told Egypt Independent that the company had already started to feel the impact on its supply prices. The source predicted that consumers will see an up to 20 percent price increase on imported products.

Local products are likely to have their prices increase as well, but to a lesser extent than the imported ones.

Egyptian products will directly be impacted, as most of them contain imported components such as raw materials, packaging and additives, experts say.

And this general surge in prices, they say, will put inflationary pressure on all production costs.
And today:
Saying that "Egypt's numbers paint a bleak picture," US Ambassador to Egypt Anne Patterson said that the country must focus on its citizens' economic needs.

Patterson said that currency reserves are “at a critical level, roughly US$14 billion, or three months’ worth of imports." She added that the number has held steady since July only as a result of regular cash infusions into the economy from Qatar and Turkey.

“These numbers do not take into account the billions that the government is in arrears to oil companies," she added. "And more importantly, they don’t highlight what Egypt is importing – basic food items and refined energy products, key determinants of social stability. If Egypt cannot pay its import bill, her people will not be missing out on television sets and cars, but on electricity, gasoline and food."
And if that isn't bad enough - how about adding a plague of locusts?
Egypt's southeast is currently facing the spectre of a major locust infestation following recent heavy rainfall and the start of a new breeding season, the Food and Agriculture Organisation (FAO) warned last week.

On Sunday, Egyptian state news agency MENA reported that vast numbers of locusts had appeared in several areas of Upper Egypt, where they threatened the wellbeing of local crops.

According to the FAO, the Egyptian Ministry of Agriculture last month managed to clear roughly 11,000 hectares of land of locusts with the use of pesticides.

Yet despite these efforts, locust numbers increased significantly in January, especially along the Red Sea coast between Egypt and Sudan, the FAO has reported.
Spengler has been predicting the economic meltdown of Egypt for over a year, and apparently it hasn't happened yet only because of the emergency cash payments.

Meanwhile, riots continue throughout the doomed country.

(h/t Missing Peace)