After the first round of the first presidential elections since the fall of Mubarak, held 23-24 May, it emerged that Mohammed Morsi and Ahmed Shafiq will participate in the run-off scheduled for 16-17 June. Morsi, candidate for the Muslim Brotherhood (MB), won 24.3% of the votes, compared to 23.3% for Shafiq, who was the last Prime Minister under Mubarak. Former Muslim Brother Aboul Fotouh and former Arab League chief Amr Moussa, who were heading the polls in the run up to the elections, stranded on a fourth and fifth place, behind Nasserist candidate Hamdeen Sabbahi. In the aftermath of the elections, protesters took to the streets in several places in the country and the headquarters of the Safiq campaign team were attacked.

Impact on country risk

The two remaining candidates for the first democratically  elected Presidency since the fall of Mubarak evoke significant resistance among important parts of the Egyptian population. Shafiq, who is campaigning on a return to security, is seen as close to the military and the former regime. If he wins the run-off, the revolutionaries who ousted Mubarak are likely to return to the streets as they would perceive this as a return to the former regime. A victory for Morsi, who has a (moderate) Islamist agenda, would mean that the MB would dominate both parliament and presidency. While such a constellation could facilitate policymaking (including the reforms that will be required for an IMF-supported program to take place), Islamist dominance may worry Coptic Christians, secularists and possibly foreign tourists and investors. The situation is thus expected to remain tense, probably even after a handover of power by the military currently scheduled for late June. If the new President fails to reach an agreement with the IMF soon, the latest increase in foreign exchange reserves registered in April (the first since the start of the revolution) risks to be short-lived.

Analyst: The Risk Management Team, r.cecchi@credendogroup.com