Libya beware; Egypt, Tunisia economies still struggling

October 20, 2011

Things are likely to move slowly for the economy of post-Gaddafi Libya, if the experiences of some of its neighbours are anything to go by.

Heading into elections, the post-Arab Spring markets of Egypt and Tunisia continue to find it difficult to pick up speed.

Tunisia goes to the polls on Oct 23, when most of the world will be focused on the EU summit, and the elections are likely to give power to a mix of moderate Islamists and left-wing parties.

Privatisation plans remain on hold, after the interim government canned a listing of Tunisie Telecom following the ousting of President Zine al-Abidine Ben Ali in January. Tunisian stocks have fallen 10 pct on the year, although this does represent a good performance compared with some other markets in the region.

For Egypt, the situation is worse. Stocks have fallen 40 percent this year, not helped by renewed protests and violence ahead of elections which kick off at the end of November.

Some ratings agencies are likely to wait until after the elections before reviewing Egypt’s ratings, but S&P cut the rating by one notch this week and maintained its negative outlook. Tunisia is also on negative outlook with all three ratings agencies.

Tourism, a major source of earnings, has fallen drastically in both countries. The death of Libya’s Muammar Gaddafi on Thursday may point to more stability and encourage tourists back into the region, but unrest continues in Syria and Jordan.

Debt insurance costs for Egypt are the same as those in Dubai, whose state-owned Dubai World triggered a domestic debt crisis less than two years ago.

“The lack of political progress has put the brakes on Egypt’s economic recovery in Q2,” says Capital Economics, adding that for Tunisia: “although the economy is in a better shape than Egypt’s, activity is still weak”.



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