Egyptian President Mohamed Morsi wants his country to join the BRICS grouping of large emerging economies. But, with ongoing instability and a shaky economy, Egypt has a long way to go before it becomes a serious BRICS candidate.
Egyptian President Mohamed Morsi has said he hopes his country will soon join BRICS, the grouping of the world’s largest emerging economies which includes Brazil, India, Russia, China and South Africa. The ambitious remarks, made in an interview with The Hindu on 20 March 2013, outline Cairo’s desire to be considered a rising economic power. In reality, however, his bold proposal is unlikely to be realised any time soon, especially given the vast challenges currently facing the Red Sea state.
During the interview, Morsi said he hoped his country could soon join those in the BRICS group. ‘I am hoping BRICS becomes E-BRICS, with “E” standing for Egypt’ he said, ending a two-day visit to India aimed at promoting bilateral trade and investment. According to Morsi, ‘this will help [Egypt] achieve political stability and start a new era of development’. He also said he expected to ratchet up bilateral trade with New Delhi to US$8 billion a year, up from US$5.5 billion now.
Morsi’s bold pitch failed to garner much enthusiasm among BRICS members, however. The Kremlin issued a tepid response, with a Foreign Ministry spokesman taking to Twitter to simply confirm that ‘Russia has noted President Mohamed Morsi’s statement about Egypt’s interest in joining the BRICS association’. It is also unclear whether Morsi broached the subject in his meetings with Indian Prime Minister Manmohan Singh. Indeed, though Egypt was invited to attend the BRICS Summit in Durban on 26-27 March, it has a long way to go before it is thought of as a serious BRICS candidate.
For starters, Egypt’s economy pales in comparison to other BRICS economies. With an overall GDP of US$230 billion, it is a fraction of the size of Brazil (US$2.5 trillion), Russia (US$1.9 trillion), India (US$1.9 trillion), and China (US$8 trillion). Even South Africa, with a total GDP of just over US$400 billion, is almost double that of Egypt, despite faltering growth of late. In addition to this, Egypt’s lingering instability has seen its development halt to a glacial pace; its economic growth was a meagre two per cent in 2012. While its economy is finally showing signs of improvement, with growth expected to be around 3.3 per cent in 2013, these are hardly the sort of figures one might expect from a rising economic power.
All this has meant investor confidence has remained low. With a soaring budget deficit and foreign currency reserves at a critically low level, the international credit ratings agency, Moody’s, downgraded Egypt’s bond rating from B3 to CAA on 21 March. By their definition, Egypt’s bonds were ‘judged to be of poor standing and … subject to high credit risk’. In explaining the downgrade, Moody’s warned that continuing instability within Egypt and its ‘vulnerability to economic and political shocks has widened the risk of default’. Such news will do little to boost confidence in Egypt’s fragile economy.
Yet growth and investor confidence could soon be boosted if Egypt can finally secure a loan from the International Monetary Fund (IMF), though negotiations been ongoing for almost two years. Egypt has said it needs a loan of US$4.8 billion to address its budget and currency crisis. The problem for Cairo, however, is that while the IMF is generally supportive of a loan, it wants to get parliamentary elections out of the way. Nobody knows for certain when that may be following a further delay in the courts on 25 March. Until an election date is set in stone, uncertainty and instability will continue, effectively keeping any loan offer on ice.
With its large population and strategic location, Egypt is right to harbour ambitions of one day joining such groups. But, given its recent instability and shaky economy, it has a long way to go before that might happen. For now, at least, Morsi’s comments appear more starry-eyed than realistic.
Indian Ocean Research Programme