(Updates markets in sixth paragraph.)
April 3 (Bloomberg) -- Another evening, another power cut at Raouf Fayez’s jewelry store in Cairo’s sprawling Shoubra neighborhood.
Flanked by darkened shops, his window display is empty of the gold ornaments that Fayez hasn’t felt safe showcasing since the 2011 uprising against Hosni Mubarak. Overlooking the scene from a poster on a neighbor’s balcony is the man who Fayez hopes can finally make it all better: Abdel-Fattah al-Seesi, who shed his military uniform last week and stepped down as defense minister to contest next month’s presidential vote.
“I am sure he’s aware of all the problems and has studied them,” Fayez said in the darkness. “It will take a lot of time, but I personally am confident that he is able to reform the country on all fronts.”
The expectations that are set to carry al-Seesi into the top job may weigh on him once he’s there. Egypt’s political struggles over the past three years have had a devastating impact on the economy, with growth stalled and unemployment rising. There are few signs of a revival since al-Seesi led the overthrow of elected Islamist leader Mohamed Mursi last year after mass protests against his rule during a sweltering summer of power outages.
“There’s a sort of desperation in the investing of hope in this one man at this moment that I think is quite problematic,” said Michael Wahid Hanna, senior fellow at New York-based The Century Foundation. “Things aren’t going to get better very quickly.”
‘Ceiling of Aspirations’
Bets that al-Seesi will end Egypt’s turmoil have helped drive stocks higher, though the benchmark index has pared gains since he declared his candidacy plans. While it dropped 2.9 percent today, it’s still up 55 percent since Mursi’s fall.
The economy hasn’t managed a similar rebound. The government’s growth target for this fiscal year was 3 percent, well below the average of about 5 percent in Mubarak’s last decade, and two ministers have said it won’t be achieved. That’s even after the government announced plans to boost public spending, and the central bank cut its key interest rates three times in the second half of 2013.
Unemployment has exceeded 13 percent and foreign reserves have plunged by more than half since the end of 2010.
Egypt has a lot of needs and few resources, Ziad Akl, senior researcher at Al-Ahram Center for Political and Strategic Studies in Cairo, said by phone. The elevation of al-Seesi to savior status among supporters “raises the ceiling of aspirations without increasing his ability to find solutions.”
While al-Seesi has said little about his economic plans, he has lamented that subsidies and debt servicing leave little money for spending in areas like health, education and housing.
Egypt’s budget deficit grew to almost 14 percent of gross domestic product in the fiscal year that ended in June, with fuel subsidies alone accounting for about 20 percent of spending, and the government predicts a 12 percent gap in the current one.
Countries need “altruism” to progress, al-Seesi said at a recent conference. “A generation or two may be subjected to injustice so that the other generations can live.”
The comments prompted a jab from political satirist Bassem Youssef.
“Does the economic platform of Field Marshal al-Seesi center around ‘bear with us’ and ‘tighten the belt’?” Youssef wrote in a column. If the public is asked to adopt austerity, “you’ll be finishing off the purchasing power in the country and leading it into recession.”
Defusing a tense political climate and reducing violence is one of the keys to recovery. World Bank data show that net foreign direct investment was negative in 2011 for the first time on record. Tourism revenue fell by 40 percent to $6 billion last year.
The Carnegie Endowment for International Peace said in a report last month that the period since al-Seesi’s removal of Mursi has seen “a use of violence that is unprecedented in Egypt’s modern political history.” It cited estimates that more than 2,500 Egyptians have been killed in protests and clashes, and several hundred more in terrorist attacks.
“I don’t expect the political turmoil to disappear once he becomes president,” said Samer Atallah, assistant professor of economics at the American University in Cairo who was an adviser to former presidential candidate Abdel-Moneim Aboul-Fotouh. “You cannot use repression to achieve political stability.”
The government, which is also battling militants in Sinai, says it is fighting a war on terror and blames Mursi’s Muslim Brotherhood for much of the violence, an allegation the group denies.
Backing from Egypt’s army and other areas of the state apparatus is “a privilege that al-Seesi has that nobody else has,” and essential to achieve reforms, Akl said.
As well as the support of many ordinary Egyptians, financial backing from friendly Gulf countries, which oppose the Brotherhood and have already pledged billions of dollars in aid for Egypt since Mursi’s fall, may also help buy al-Seesi time and make changes that will bolster the economy.
Before he stepped down as defense minister, the army revealed a partnership with U.A.E-based Arabtec Holding to build a million homes over five years, touting the plan as part of an al-Seesi initiative.
“The grip of the armed forces on the economy is strengthening, and Gulf aid to the current Egyptian leadership is becoming more assertive,” said Islam Al Tayeb, a research analyst at the International Institute for Strategic Studies. While that may help al-Seesi for now, “unless the perilous economic situation is dealt with, there will be a growing risk of discontent when the masses become disillusioned.”
Back in teeming Shoubra, while jeweler Fayez is optimistic that al-Seesi can put such advantages to good use, one of his neighbors is more circumspect.
Mohamed Mahmoud said he hasn’t decided who to support for president. “Things will be worse in the summer, a complete disaster,” he said as he turned away a prospective customer from his key-making shop because of the power cut.
This week, Prime Minister Ibrahim Mahlab held an “emergency meeting” to discuss the power cuts, his office said.
Mahmoud said he had to let two of his three workers go because he couldn’t afford their salaries. “There are people who are suffering more than I am,” he said. If the next president doesn’t improve their lives, “it’s these people who will turn against him.”