Impact of Political Instability on Economic Growth in Egypt

Abstract

This study aims to identify the impact of political instability on economic growth in Egypt during the period (2000-2022). There is a close connection between economic growth and political stability. On the one hand, the uncertainty associated with an unstable political environment may reduce investment and accelerate economic development. On the other hand, poor economic performance may lead to government collapse and political unrest. In Egypt, the real GDP growth rate increased in the period from 2000 to 2008 from 5.1% to 6.8% and decreased before the revolution of January 25, 2011, to 5%, but it decreased sharply after the revolution to reach 2% in 2015 and then rose again to 6.6. % in 2022. This research studies the mutual influence of government changes and economic growth on each other. The primary finding of this paper is that in countries and time periods with a high probability of government collapse, growth is much lower. This effect is strong for both types of government changes: change in the structure of government but not in its ideology, and “irregular” transfers of power as in cases of revolutions and coups. The study, which used the descriptive approach, is an attempt to find out the harmonious relationship between political instability and economic growth. Using structural equation modeling, the results indicate that political stability is the right direction with economic growth. The results also confirm that political instability increases the strength of the positive relationship between the variables. Considering the evidence, the paper proposes some suggestions and implications for promoting the development of the economy so that economic growth and instability can be achieved at the same time.