As Egypt's first democratically elected president, Mohamed Morsy, and his newly appointed prime minister, Hisham Qandil, assume their new roles, there is broad-based recognition within the country of the critical importance of the economic situation. The economy speaks to more than the realization of the objectives of the popular uprising that erupted in Cairo's streets in January of last year -- a revolution that, in just 18 days, overthrew a president who had ruled with an iron fist for almost 30 years. Perhaps just as fundamental as political reform, Egypt's economic strength will determine whether the revolutionary process succeeds or, instead, falls victim to counterrevolutionary movements.
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Egypt's current economic situation is far from reassuring. Growth is insufficient, factories are operating well below capacity, and investment in new industry and equipment upkeep is way too low. Meanwhile, too many foreigners, be they among the millions who each year visit Egypt's incredible attractions or those who channel foreign direct investment into the country, are understandably nervous and staying away. In the process, they withdraw oxygen from a struggling economy.
Unsurprisingly, unemployment and underemployment are worrisomely high, constituting a huge economic and social challenge. It is not just the 12.6 percent official unemployment rate that most believe understates the extent of the problem. Among the young, many of whom so bravely led last year's popular uprising, the jobless figure is above 25 percent. No wonder so many are frustrated at the slow progress being made in improving the livelihood for millions of Egyptians.
Meanwhile, too many of those who are employed find that the combination of years of frustration and low wages, together with new sky-high expectations, is undermining labor relations and triggering periodic strikes. The result is an economy that is producing well below potential and has an even greater shortfall relative to people's aspirations and expectations.
Unfortunately, Egypt does not have a meaningful pool of savings to help transition through these challenging times. Too many citizens already live near or below the poverty line. Social safety nets are stretched thin. The fiscal deficit is running above 10 percent of GDP, contributing to higher borrowing costs and a weakening of the once strong debt dynamics. And over two-thirds of the country's stock of foreign reserves has been used up in the last 18 months, reducing the stock to about $15 billion.
The longer this persists, the greater the risks to the revolution. And the implications will be felt well beyond Egypt. The country's well-being has a direct bearing on the stability of the Middle East. Additionally, with a population over 80 million, it is not surprising that some European officials worry in private about the possibility of waves of Egyptian migrants.
Those of us who know Egypt well and follow it closely are, of course, concerned. We sense the mounting frustration of many Egyptians. We fear the high human costs. We worry about the pessimism that is starting to spread. And we recognize that the longer all this persists, the harder it is for Egypt to complete the critical pivot that follows the overthrow of a government. For it is not the topping of a regime that determines the overall success of a revolution -- it's dismantling the past in favor of a better future.
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