Egypt's economy slumps under weight of unrest

Drivers passing Tahrir Square in downtown Cairo curse the protesters.

On radio shows, callers question whether the youth activists and others involved in the new wave of demonstrations over the past week are nationalists, selfish children or saboteurs.

Political differences aside, what has become clear is that the latest clamor against Egypt's military rulers is pummeling the country's already flailing economy at a crucial time when many hoped winter tourism would pick up. A financial crisis is looming, say analysts.

"We're not far off," said Neil Shearing, chief emerging markets economist with Capital Economics. "There's enough money left in the coffers to get through the year, but not much beyond that. Crunch time is two to three months away."

It took 30 years to engineer the revolution that ousted former President Hosni Mubarak in February. But it only took months to push the 7 percent annual growth rate of recent years to an anemic forecast of only about 1 percent this year.

The difficulties keep mounting. The stock market tanks daily and foreign reserves have fallen by almost 40 percent so far this year.

The drop is linked to the protests that have persisted since Mubarak's fall, and more specifically, the wide gap between the expectations of the population after the uprising and the reality of what the government could deliver.

From iconic Tahrir Square, the epicenter of the revolution, to the city's middle income neighborhoods and slums, the sobering realization that the hopes for democracy have not translated into a better standard of living is leaving Egyptians increasingly frustrated - with the military rulers, with the interim government that resigned a few days ago and, perhaps more troublingly, with each other.

"The move toward democracy is something that should be a beacon for the rest of the region," said Shearing. "But we've clearly reached a point ... where there needs to be some political stability because the financing risks are severe."

As of October, the country's net foreign reserves had fallen to $22 billion from $36 billion at the end of 2010. At least part of that money has gone to supporting the Egyptian pound, which economists worry could face severe depreciation if officials don't shore up the country's finances.

At the famed pyramids of Giza, when horse rides, papyrus prints and tours failed to entice some tourists, a young guide turned to the unorthodox.

"Girls?" offered 23-year-old Samir Adham, flashing a sly grin. "Hashish?"

He apologized when he realized the offer was made to a reporter.

"No one comes any more," he explained. "What can I do? I have to make a living," he said, bemoaning the hammering of Egypt's vital tourism industry, one of the country's top money-earners, since the revolution.

The troubles confronting Adham and others in the tourism sector are a window into the country's broader challenges.