In light of ensuing protests in Egypt, attention has been turned to the potential effects the crisis will play on the already stunted global economy. President Morsi of Egypt announced that his decisions would not be subject to judicial oversight until a new constitution has been enacted. This seemingly dictatorial declaration is what sparked the unrest that has already greatly affected the national economy. The protests are continuing, as seen on Sunday when supporters of Morsi surrounded the judicial court, forcing them to suspend sessions until protests have ceased. Due to the continuation of this crisis, the global economy might soon experience some dangerous effects that the Egyptian economy is already facing.
The largest piece of evidence of the floundering Egyptian economy emerged last week when stocks plummeted, making it the worst regional market. Already hesitant investors are now even more reluctant to invest their money in Egypt, completing the vicious cycle that is the Egyptian stock market. Furthermore, the tourism industry has collapsed, unemployment levels are rising in the double digits, and poverty levels are higher than ever. Diminishing reserves in the nation coupled with the necessity of maintaining imports will result in a rather chaotic economy.
Egypt’s outputs aren’t what will harm the global economy, considering their exports are equivalent to that of Alabama. However, Egypt plays a major role in oil exports because oil flows through Egypt. Egypt has control over the Suez Canal; it remains open, but could severely limit the interaction between Europe and Asia upon closure. Possibly even more threatening is the possibility of unrest spreading to neighboring Middle Eastern nations that actually do control oil. This could drive up the price of oil and other exports even more, which would continue to slow global economic growth.
While a majority of protest implications are centered on the Egyptian economy itself, it is possible that they could seep into the global economy as well. As long as President Morsi can quell the protests and encourage the creation of a new constitution quickly, the global economy should hopefully not face any doom in the form of raging oil prices or the closing of the Suez Canal. As for now, consolidation of the government and a strong economic policy in Egypt will encourage the return of investors and hopefully some recovery of stability.