Since Egyptian President Abdel Fattah el-Sisi took power in June 2014, his military-backed regime has spared no effort in trying to secure a quick economic recovery after four years of low growth rates, soaring unemployment, widening budget deficits, and dwindling foreign reserves.

By mid-2015, there were signs that those efforts were beginning to bear fruit. But economic recovery has become a highly politicized topic in Egypt, with both the regime’s supporters and its critics arguing that the country’s economic health will determine its political future.

Amr Adly
Adly is a nonresident scholar at the Carnegie Middle East Center, where his research centers on political economy, development studies, and economic sociology of the Middle East, with a focus on Egypt.
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These views, however, give too much weight to economic matters, while ignoring other important social, political, and structural factors that will help determine the regime’s ability to consolidate its rule and maintain stability. And the link between economic recovery and political stability may not be as direct as either side suggests.

Supporters of the regime see any signs of economic improvement as evidence that Sisi’s policies are working, and that the current political situation—in which the government is introducing top-down reforms to relaunch the economy without tolerating much political pluralism—should be maintained.

Sisi’s opponents worry that economic recovery would boost the popularity and legitimacy of his authoritarian and repressive regime, helping him to consolidate his power. They stress that neither growth nor investment can fully recover amid rampant violence and a constrained political environment. And many regime opponents see continued economic crisis as a way to extract political concessions in the areas of basic rights and liberties—which may explain why some have tried to derail the recovery efforts and downplay any signs that they are working.

But economic recovery does not appear to be automatically related to power consolidation. While recovery might help Sisi tighten his grip on the state, it could exacerbate the many political and social problems facing the regime. Indeed, continued economic deterioration—that is, the absence of recovery—might also deepen the regime’s political crises. Ironically, worse economic conditions and intensified social conflict and civil unrest could help the regime to consolidate power if that is seen as the only option against further instability and chaos. 

Two Views of Recovery

Supporters of the Egyptian regime have viewed economic recovery as the single most important precondition for power consolidation in Egypt. International financial institutions and the regime’s Gulf allies all agree that economic recovery is key to social stabilization and political consolidation.

For the regime and its local and regional allies, a recovery would prove that Sisi and his government were able to deliver necessary reforms. Higher growth rates and more jobs would lead to better standards of living—and block a return to social unrest and the resurgence of protest.

The regime’s political rivals, especially the Muslim Brotherhood and its allies, agree that an economic recovery would have important political implications. They fear that if growth rates pick up, investment flows back into the economy, and macroeconomic indicators improve, then Sisi’s grip on power will only tighten. In contrast, an inability to achieve economic recovery would translate into greater dissatisfaction and disillusionment with the Sisi regime, paving the way for a broader base of political and social protest and providing a recipe for future instability. 

These critics therefore have a keen interest in derailing the country’s nascent economic recovery. The Brotherhood and its Islamist allies have staged continuous public protests and launched antiregime media campaigns. The government and proregime media have accused the Brotherhood and some related groups of sabotage, pointing to sporadic bombings in major cities like Cairo and Alexandria as evidence of an organized effort to counter the regime’s recovery efforts.

The State of the Economy

Despite those efforts, economic recovery—as seen in higher growth rates, better investment performance, and the rebuilding of foreign reserves—may indeed occur by 2017 or 2018.

In April 2015, the International Monetary Fund raised its expected rate of growth for Egypt’s economy in 2015 to 4 percent, up from an October 2014 projection of 3.5 percent. Egypt’s credit rating also improved steadily in late 2014 and the first half of 2015. Moreover, considerable foreign investment—as much as $36 billion, according to government officials—and aid were promised to Egypt at an international investment conference that the government hosted in late March 2015. 

However, such improvement is unlikely to solve the long-standing, structural problems that have plagued Egypt’s economy and led to the erosion of support for former president Hosni Mubarak, who was ousted in 2011.

In fact, under Sisi, the same economic model that prevailed under Mubarak has been re-created to a great extent. The new regime’s policy changes have been targeted exclusively toward big business and foreign—namely Gulf Arab—investors. Meanwhile, subsidies for the general population have been slashed, without offsetting social policies to mitigate the higher prices that ordinary Egyptians now face. The regime has shown a general inability or unwillingness to introduce progressive taxation on property and capital holders, which would make it possible to redistribute income and improve the quality of public services in areas such as healthcare and education.

With that, the same patterns of social and economic marginalization that existed before the 2011 revolution are being reproduced. While the Egyptian economy grew at an impressive rate during the last years of Mubarak’s rule, little of that trickled down to the broad base of the population. Unemployment skyrocketed. Inflation led to the erosion of real wages for the middle classes and the urban poor. All these factors only aggravated Egypt’s social conflict and exacerbated the political crisis that confronted Mubarak.

To be sure, Egypt’s military-backed regime also faces problems that are not directly related to the country’s economic condition. These are tied to ongoing efforts to establish a functional political system with the capacity to represent various societal interests, create an intermediate political class to populate the parliament and local government, and contain political Islam. There is little doubt that economic conditions would impact the options available to the regime in dealing with these challenges. However, it is far too economistic and reductionist to see them as chiefly economic issues.

An Alternative Scenario

Even if Egypt’s economy deteriorates further, Sisi may still be able to tighten his grip on power. In the absence of recovery, standards of living would decline for the majority of Egyptians. And, because the political arena is virtually closed, popular dissatisfaction with the regime would likely take the form of intensified social conflict, with social decay, rising criminal violence, alienation, and unrest.

Those conditions would only exacerbate the insecurity already felt by the middle classes in Egypt. Such a nightmarish scenario would lower their bargaining power vis-à-vis the regime, pushing them further into accepting authoritarianism, systemized human rights violations, and police atrocities. 

This change in public attitudes has already been happening in Egypt. An undeclared strike by police between 2011 and 2013 led to visibly higher rates of criminal activity in the form of burglary, robbery, and kidnapping. This lack of personal security also made middle-class Egyptians more tolerant of—and complicit in—police atrocities in nonpolitical cases, usually against the urban poor.

The number of people killed in police stations and prisons in normal criminal cases, usually due to torture and abuse, has been growing at an alarming rate since 2011. Interestingly, and sadly, this is no longer a bone of contention for Egypt’s middle classes. While earlier violations—such as the 2010 killing of Khaled Said, a youth who was beaten to death by two undercover policemen—unleashed a popular uproar against Mubarak’s forces, such acts are no longer a reason for protest.

Further social and economic decay may weaken the position of the middle classes in respect to their autocratic rulers, and drive them to accept human rights violations and the absence of basic freedoms and rights as the price to be paid for a government that sustains order in the country. Expectations have already been lowered considerably after three years of failed political transition between 2011 and 2013. Sisi came to power making few promises, other than to save the state and safeguard the social order from chaos and civil breakdown.

Looking Beyond the Economy

Today, there does not appear to be an automatic link between economic recovery and power consolidation in Egypt. The regime’s strength will be affected by many factors that have little to do with the country’s overall economic situation. These include the dynamics of the political system itself and the regime’s ability to breed a political class that can play the role of intermediary between the military-backed president and the rest of society. Others are structural, such as the insecurity that the middle classes may feel toward political and social transformation and the expectations that different societal groups may have of the political regime.

Political stabilization in Egypt requires much more than higher growth and investment rates in the immediate term. A stable and functional political system that provides at least minimal representation of Egypt’s different social groups is also essential. At the same time, future economic policies and institutional changes must address the structural problems of income distribution and redistribution. Fundamentally, Egypt’s real challenge is ensuring political as well as economic inclusion for the broadest array of social groups and classes possible.