Sisi Secures a Mandate

Egypt held its presidential election on May 25, and, as seemed a foregone conclusion, the victor was Abdel Fattah el-Sisi, the former commander of the armed forces and the leader of the coup that toppled the Islamist government of President Mohammed Morsi in June 2013. The recently retired military leader won 96.9% of the vote in a contest with only one other challenger.

Sisi’s mandate is clear enough, but not nearly as overwhelming as it might appear at first blush. Turnout for the vote was less than 48%, and the reasons that a majority of eligible voters failed to participate were not limited to apathy over an election whose outcome was a near certainty. The legal marginalization of the Islamist political forces that won both the legislative and presidential elections held in 2010–2011 also played a role, and key opposition groups, including some that supported the coup that toppled Morsi’s administration, but have more recently themselves been targeted for repression by the military-backed interim government boycotted the vote.

Many Egyptians see Sisi as a figure whose decisive action against Morsi’s government in mid-2013 prevented the country’s slide into civil war and economic chaos. But it is not entirely clear how many of those who voted for Sisi believe that they have accepted less democracy as a price for stability. Even among those willing to strike such a bargain, there are high expectations that Sisi will deliver, not only in terms of domestic security, but also, and perhaps especially, in the economic arena. It remains to be seen whether the new president can do so, even if he dispenses with the complications inherent in a pluralistic democracy.

Since the appointment of Ibrahim Mehlab as prime minister of the interim administration in February, the government has made progress on key reforms, including the first steps toward reducing the bill for energy subsidies. The government has also introduced a new tax on high incomes and a 10% tax on capital gains, and issued smart cards as part of a quasi-rationing system for subsidized goods such as food and fuel.

Sisi has reappointed Mehlab as prime minister, and has signaled that he will also retain Finance Minister Hani Kadri Dimian in his Cabinet. That bodes well for near-term continuity with regard to economic policy, but it is unclear how committed the president is to carrying out a reform agenda, and whether he will stay the course if unpopular measures trigger a renewed explosion of urban unrest.

Support from the Gulf monarchies and the desire of western governments to avoid further instability in Egypt at a time when Iraq’s possible disintegration is already threatening to throw the entire region into chaos will buy Sisi some time if domestic political considerations necessitate a cautious approach. But Sisi has promised that he can produce both economic prosperity and domestic stability, and if events prove otherwise, there is little reason to expect that he will be able to count on greater loyalty from his former military colleagues than was the case for either Mubarak or Morsi.

Forecast Summary

SUMMARY OF 18-MONTH FORECAST

REGIMES & PROBABILITIES Military-Civilian
80%
Military
15%
Reformist Coalition 5%
RISK FACTORS CURRENT  
Turmoil Very High Same SLIGHTLY MORE SLIGHTLY LESS
Investment
Equity Moderate Same MORE SLIGHTLY LESS
Operations High SLIGHTLY MORE MORE Same
Taxation Moderate Same SLIGHTLY MORE Same
Repatriation Moderate Same MORE Same
Exchange Moderate SLIGHTLY MORE MORE Same
Trade
Tariffs Moderate Same SLIGHTLY MORE Same
Other Barriers Moderate Same MORE SLIGHTLY LESS
Payment Delays High Same SLIGHTLY MORE SLIGHTLY LESS
Economic Policy
Expansion Very High Same SLIGHTLY MORE SLIGHTLY LESS
Labor Costs Moderate SLIGHTLY MORE SLIGHTLY MORE SLIGHTLY MORE
Foreign Debt Moderate SLIGHTLY MORE MORE SLIGHTLY MORE

SUMMARY OF FIVE-YEAR FORECAST

REGIMES & PROBABILITIES Military-Civilian
70%
Military
20%
Reformist
Coalition 10%
RISK FACTORS BASE  
Turmoil Moderate SLIGHTLY MORE MUCH MORE Same
Restrictions
   Investment Moderate Same SLIGHTLY MORE SLIGHTLY LESS
   Trade Moderate SLIGHTLY LESS SLIGHTLY MORE SLIGHTLY LESS
Economic Problems
   Domestic High SLIGHTLY LESS Same LESS
   International High Same SLIGHTLY MORE SLIGHTLY LESS
   * When present, indicates forecast of a new regime

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