Egypt votes in tense poll on new constitution

Egyptians vote in constitutional referendum

Egyptians kicked off another tense poll on a cold tense Tuesday morning to have their say on a new constitution that will set the stage for parliamentary and presidential elections later this year.

The referendum is widely seen as a crucial litmus test for how citizens feel the army has handled the transition since the ouster of former President Mohammed Mursi last summer.

(Read more: Egypt to vote on amended constitution mid-January)

It could also open the door for the candidacy of army chief General Abdel Fatah El Sisi, a scenario he said was possible if Egyptians called on him to lead the country.

Polling stations will be open for 12 hours from 9 AM Egypt time on Tuesday and Wednesday. No indication has yet been given as to when results can be expected.

Banner in downtown Cairo asking voters to say "YES" in the referendum.
Yousef Gamal El-Din | CNBC

Some 52 million Egyptians are eligible to take part. The government has taken additional security measures to ensure the vote goes smoothly. Officials said 200,000 police officers and 160,000 soldiers will help guard more than 30,000 polling stations across the nation.

But despite these security measures, five people were killed in protests on Tuesday.

The Muslim Brotherhood has announced it would boycott the vote. There have been renewed clashes between security forces and supporters of the outlawed political movement in recent weeks.

(Read more: Egypt fights torekindle economy with rate cuts)

Earlier in the day, a bomb went off in the Imbaba district of Cairo just before polling began, with no reports of casualties.

Banners and posters throughout the capital predominately campaigned for a "YES" vote, framing it as a "national duty" with little tolerance for opposition. Human Rights Watch (HRW) criticized the lack of freedom of expression in a statement on Monday.

Graffiti with Egypt's "Independence Movement" call to approve new constitution.
Yousef Gamal El-Din | CNBC

Economy Still Weak

Three years on since the Egyptian Revolution began, the country's formerly once-vibrant economy is still struggling in the shadow of political uncertainty.

Economic growth has been on a downward slope, with officials recording an annual rise of 1.5 percent last quarter, far off the seven-plus percent achieved before the uprising. The interim administration has passed two stimulus packages in a bid to revive economic activity.

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The ouster of Mursi last July has fueled a new wave of violence. And that means crucial economic drivers such as tourism, foreign direct investment, and remittances from abroad have only seen a sporadic recovery.

Net foreign direct investment was just three billion dollars last year, half of what it was back in 2010.

"The key issue is economic growth is low, inflation is high and as a result the government is still suffering and have a high budget deficit. There are so manycrisis to happen at once they're all fire fighting," Angus Blair, Founder atthe Signet Institute, a Cairo-based think tank, told CNBC.

Egypt's budget deficit in 2012/2013 reached a record-high of 13.8 percent of gross domestic product.

(Read more: Egypt stocks hit high since 2011 uprising)

But there are glimmers of hope. The Central Bank's acute shortage of foreign currency reserves appears to have eased, for the most part due to billions of dollars in aid from the oil-rich Gulf States. The International Monetary Fund (IMF) projects economic growth to accelerate to 2.8 percent in 2014.

Equity investors appear to be bullish about the transition. In the last six months, the Egyptian Stock Exchange has risen 45 percent to the highest level in three years.

"Definitely there were minor skirmishes here and there, but if you ask me as a foreigner living in Egypt the sentiment is positive post what happened in June," Allen Sandeep, Director of Research at NAEEM Brokerage, explained to CNBC.

On Tuesday, the EGX 30 benchmark index ended the day 1.11 percent higher.

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