CAIRO: While unemployment is down from last year, the latest numbers show a rise from the previous quarter, suggesting that the global economic crisis may be taking its toll on Egypt.
Unemployment was 8.8 percent for the fourth quarter of 2008, according to numbers released this week by MENA, the state news agency.
While this represented a decrease from 9.1 percent during the same period last year, the fourth quarter was the first to play out under recessionary conditions. This factor was evidenced by the fact that unemployment stood at 8.6 percent during the previous quarter.
Though 8.8 percent is a historically good number for Egypt, there is concern that the economic crisis could lead to a further rise in unemployment. If unemployment continues to increase, it could conspire with the low wages that are prevalent in most of the country to create economic and political instability.
“I think unemployment might reach 10 percent, but I don’t think it will go much beyond that, said Walaa Hazem from investment bank HC Brokerage.
Hazem said he believes that the workers who will suffer most are the semi-skilled. And one of the biggest problems, he noted, is the continued layoffs of workers around the country.
It’s not just that jobs aren’t being created, it’s that they’re being destroyed – to the tune of 55,000 in the fourth quarter of 2008.
If Egypt can get through this rough economic patch, it may be able to get a handle on unemployment since government reform and liberalization policies have continued to bring the rate lower in recent years.
But despite a decreasing unemployment rate, the country’s population growth has made job creation vital to its future economic success.
“Unemployment has been declining, said Hazem, “But in absolute terms the total number of unemployed have been increasing.
Egypt has finally managed to get a handle on unemployment among the youth population. This has resulted in much of the decline in the unemployment rate over the past several years.
A report released by the Brookings Institution earlier this year noted that youth unemployment in Egypt fell from 25.6 percent to 16.9 percent between 1998 and 2006.
Still, the latest numbers have been cause for some concern among economists since it marks the reversal of a trend that has seen unemployment numbers fall dramatically.
This latest uptick serves as a reminder that Egypt is not as immune to the economic crisis as was once believed. Foreign direct investment (FDI) in Egypt has been a major cause among some of the government’s reform-minded ministers. They have worked arduously to loosen trade laws and encourage direct investment.
FDI has brought jobs and wealth into the country, but it has also made Egypt more vulnerable to the shifting sands of the international economy.
While some projects that are a result of FDI are still coming online, many are on hold and many multinationals are refusing to seek out new projects until the worst of the recession has past.
For an economy that has shifted to be compatible with foreign investors, the labor-force may now suffer.
And some economists think it may take some time for the unemployment numbers to start inching back down.
“Unemployment will not stabilize until the fourth quarter of this year or the first of next year, said Hazem.