Egypt: two steps forward, one step back

It’s been a mixed month for Egypt’s post-revolution economy. The good news is that a $4.8bn programme with the IMF has been agreed at a staff level, paving the way for formal approval by the Fund’s board by the end of the year. However, the good news regarding an IMF deal has been overshadowed by a subsequent move by President Morsi to grant himself virtually unchecked powers over the judiciary. The stock market, which had rallied following the IMF agreement, tumbled by 10% on the news. We still think that Egypt’s medium-term growth prospects are positive. But if nothing else the events of the past few weeks illustrate that progress over the next year will be extremely bumpy.