Bracing for the Double Dip in 2011
At the beginning of the year, we asked leaders from the business community whether they thought the global financial crisis had finally come to an end. Just 12 months later, we are likely on the brink of another global slowdown and a double dip recession would strain many Western economies. Egypt too would have to revise its economic growth plans.

The revolution and the ensuing political chaos wreaked havoc on Egypt’s economy, with GDP growth plunging to 1.6% from 5.1% over the last year. What was originally seen as a chance to end corruption, nepotism and careless spending has turned into a mess of uncertainty, violence and lost jobs for a country already struggling with high unemployment and rampant poverty. That’s without mentioning the growing gap between the rich and the poor as well as an education system in need of major reforms.

It is no surprise then that the business leaders we survey throughout the year are worried. Stagnant sales, bearish stock market conditions, difficulties in securing loans as well as general strikes are only some of the challenges they’ve been dealt in 2011. While some industries, like food producers, are coming out on top, exporters, real estate firms and banks are struggling, which is putting further pressure on the stock exchange and investor confidence.

Below is a review of how the business community fared over the last year and their expectations for 2012, which are more uncertain than ever.
The data, provided to Business Today, is compiled by GfK marketing research group and surveys a random sample of 100 small-, medium- and large-sized Egyptian businesses each month.

The Insider: Reviewed
In last January’s barometer report, companies reported decent sales for the end of 2010. Around 30% said things were slightly worse than they had been recently, but most remained optimistic with 51% predicting the next three months would be better. Fast forward to March when 35% of respondents claimed sales were still dropping, with another 6% claiming their figures had dropped heavily. Still, businesses were confident things would improve in the near future, with 40% of those surveyed hoping for brighter sales numbers soon enough.

In June, sales were at an all-time low, with 38.6% reporting massive drops and another 24.8% claiming slight slumps. Only 5% reported slight improvements. Pessimism settled in with 42.6% expecting similar challenges over the next three months.

October saw things get back on track for the most part, but few (12%) could claim rising sales. In fact, 45% were still seeing lower numbers.

That could be why suddenly 31% reported being strongly constrained by a lack of cash, while another 41% described operations as strained by financial troubles. As seen in November’s barometer, these figures have not improved much in recent weeks.

In the News: A Year to Remember
Looking back at 2011, the January 25 Revolution and its political, economic and social fallout easily take the top spot as the most important news item affecting the business community over the past the year. But what followed tested the transitional government’s resolve, strained the economy and scared foreign and domestic investors: the stock market’s closure for over one month earlier this year, corruption trials of National Democratic Party members, a lack of stability ahead of parliamentary elections and the on-going instability in Libya. To be sure, for some industries it was business as usual, but for most political and legislative uncertainty defined a year they would like to forget.
 
The Forecast: More Gloom and Doom
Still reeling from the many varied aftershocks of the global recession, January saw most respondents predicting the economy would falter or stay the same. Around 34% said things would get worse, while 44% predicted things would stay the same. Only 22% were positive about the future. Those numbers improved substantially when asked about two years down the line. A majority saw the economy recovering, while only 17% said conditions would worsen further.

In April, more decided the strained economic conditions were here to stay and would depress the economy. Another 39% hoped for better conditions, whereas 28% said the economy would stay on an even keel. Down the road, their predictions were much rosier, with 77% forecasting better conditions.

But a bleak outlook continued to build as criticism of the military hurting the country’s recovery intensified. Most (68%) said the economy would stay on course, perhaps a sign of their resignation to Egypt’s lackluster growth estimates. However, the worse things get in the present, the better the future seems, according to those surveyed. Some 89% predicted brighter days in two years.

This month 46% say the next three months will hit the economy hard once again, with 45% claiming not much will change at all. Only 9% predict positive results, likely based on predictions of violence surrounding Egypt’s first polls since the revolution. An overwhelming majority, 82%, remain optimistic about Egypt’s economic recovery. bt