Guide to Economic Recovery

Kindly check your political views at the door.

Many of you have been calling and e-mailing asking for my “economic” view on what’s happening, forecasted impact on the economy and what can be done.

I would much prefer to focus on the last point because worrying and fretting about impact is a useless exercise while exploring what we can do might actually have some good.

1) Regarding the campaign to invest 100 LE in the Egyptian Stock Market. In my humble opinion this is a minimum impact exercise, the only ones who stand to really gain are those seeking to currently exit the market and the brokerage companies. The money you invest goes into the pockets of previous owners of that stock, the company itself (whose stock you are buying) does not benefit. This money will not result in production or job generation, let alone any impact on the real economy.

Having said that, if you have liquidity to spare, this is actually an excellent time to invest in the stock market, you can buy low in the hope of selling high a little down the line when the stock market revives. So I’m not saying don’t do it, just make sure you know why you are doing it.

2) Please, please, please, for the Love of God, don’t panic. Panic is bad. Read up on what happened to the Egyptian economy the last time there was a bank run. Moreover, the panic is unsubstantiated, the most respectable economist in the nation (I’m entitled to my opinion) Mr. Farouk El Okdah himself, assures you that your deposits are guaranteed. Your money isn’t going anywhere, no need to try to withdraw it all. Lets make sure there is enough liquidity to go around to guarantee normal business operations.

3) Only buy dollars if they are essential for your business operations. I understand your fears, I do. You are forecasting a major appreciation of the dollar vis-a-vie the pound and double-digit inflation in Egypt. Regarding the first point, the central bank is using its reserves to maintain the exchange rate as much as possible, while I too am forecasting some appreciation in the coming period, it won’t be the mega jumps you are expecting or possibly hoping for. A stable exchange rate reflects very positively in the global arena and will make recovery much faster once things are settled.

Meanwhile, for those fearing that their assets in the bank will lose value as the inflation rate continues to rise diminishing their purchasing power, you have some alternatives, if your current cash flow and liquidity levels allow it, you are looking for a hedge. Hedge funds are not prevalent in Egypt, you could opt to invest in the stock market (see the first bullet), you could opt to invest in commodities (this includes but is not limited to Gold and other metals), for the larger players you could opt to buy out business owners whom are trying to exit the market.

4) Support the small guy (hat-tip to Inji El Abd). For example, the fruits and vegetables in the market are very perishable, when you buy, buy from the small guy with the wooden carts on street corners rather than the hypermarkets of the world. For one, he needs the money more to sustain his family through the transitional phase. Second, they have better storage and refrigeration options and can bear the wait for a little longer.

5) Go local (those of you who have known me long are already bored with the request). Some of the non-Egyptian players in the market have temporarily relocated, some have withdrawn their funds and business for good. This has created an opportunity in the market (I realise that’s an incredibly cup-half-full way to look at it). Yet the opportunities exist, this capacity can be taken over by players still in the market or by investors such as yourself. Support the local players, support those still in the market, buy their products, work at their establishment, make sure they churn a profit and pay wages and generate spending and further economic growth as the multiplier effect comes into play.

Some suggestions on local products here.

6) Be fuel-efficient. Limit the use of your motor vehicle, car pool, walk or bike.

7) Spend your vacations in Egypt. Tourism sector may have been hit for a while, but there is absolutely no reason why we Egyptians shouldn’t take the opportunity to get to know our country better. Take a weekend at a city you’ve never been to, head to the coasts, go to the Red Sea, live it up, stay at the fancy hotels or the little ones, all of them could use the business and you would have a good time.

8 ) Plan your spending in the coming period, don’t hoard food and other products, ensure equitable distribution of available produce until the logistics and retail sectors recover. Contemplate diverting some of your current savings into investments. If you are a business owner don’t close your business, stay open, pay wages, bear a temporary loss, work on generating new business, confidence will create more confidence and spending will result in greater spending and will God’s willing expedite economic recovery.

Good luck to us all.

الطرق المثلى للخروج من الأزمة إقتصاديا بشكل يفيد الأشخاص ولا يضر الإقتصاد العام

١- إستثمار كميات قليلة (رمزية) من النقود في البورصة قد لا يؤدي النتيجة المرجوة من إنقاذ الإقتصاد.. ولكن بشكل عام البورصة الأن تعتبر فرصة قيمة للإستثمار حيث أن الأسهم ستكون في أقل المعدلات الأن وسوف تتزايد تدريجيا.

٢- لا داعي للهلع والتوتر فهو لا يجدي أبدا ولا مبرر له. كل مودعات المستثمرين والمدخرين مكفولة ومحفوظة ولن تضار. حافظ على وجود كم كافي من السيولة في النظام المصرفي في مصر لإدارة الأعمال.

٣- لا تقم بشراء الدولار إلا عند الضرورة. قد تكون قيمة الجنيه في إنخفاض الأن في مقابل الدولار إلا أن هذا لن يكون بالقدر الذي يتوقعه العامة. وإذا كنت تريد ضمان القيمة الشرائية لمدخراتك فقد تحقق هذا (بل وبعض المكاسب) إذا أستثمرت في البورصة أو أسواق الذهب والفضة.

٤- أدعم صغار التجار.. الراجل بتاع الخيار اللي عالناصية. لأسباب عدة منها أن كبار التجار لديهم طرق أوسع للحفظ والتخزين وإحتياطي نقدي يسمح لهم بتحمل تأخر البيع و الربح.. بينما صغار التجار يكونون أكثر سرعة في التأثر ولا إحتياطي لهم.

٥- أشتري المنتج المحلي. المنتج العالمي مدعم بإقتصاد شركته أما المحلي فيعتمد كليا على قوة الشراء المحلية.. وحقيقة الأمر أن الكثير من المنتجات العالمية قد تقلل من تواجدها في مصر في الفترة المقبلة مما يتيح فرصة للمنتج المحلي الجيد للإستيلاء على قسط أكبر من السوق المصري.

٦- وفر في إستهلاك الوقود.

٧- إعمل على تنمية السياحة الداخلية.. بلاش إيبيزا السنة دي.

٨- إقتصد في الإستهلاك: لا تخزن أكثر من حاجتك.. عدد منافذ إستثمارك.. إستمر في إدارة أعمالك ودفع الرواتب وإن تحملت خسارة صغيرة مؤقتة ففي هذا المنفعة الإقتصادية الأكبر لك

Translation courtesy of Hazem Shoirah.

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4 thoughts on “Guide to Economic Recovery

  1. Pingback: 100 LE to Save the Egyptian Economy « Ramblings of the Disoriented Mind

  2. Reblogged this on Ramblings of the Disoriented Mind and commented:

    3 years later. We are pretty much where we were on the economic front. Outlook remains shady yet the recommendations remain constant. I still wish there were more consistent efforts by the economic community to spread awareness and to educate.

  3. I understand the passion-driven recommendation to buy from the small guy with the wooden cart to help support his family. But economically speaking, doesn’t the megamart feed more employees, and their families? If the megamart goes down, it lays off employees with families. Also, if those megamarts offer cheaper prices -because they can afford to- wouldn’t that give add buying power to its customers’ money. Well?

    • The recommendation was driven by the concept of sustainability. The ability of the mega-mart to tide over what at the time was perceived as a set-back, far exceeds that of the little guy. Are they cheaper though? They have far more over-heads. I am all for stretching the dollar around, boosting consumption and ensuring the multiplier acts in the best possible way.

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