Effects of COVID-19 on Egyptian economy

CAIRO - The COVID-19 pandemic will be devastating to the Egyptian economy in the short term.
The overall effect of the disease-induced emergency will depend on how long before it
subsides.

The COVID-19 outbreak is paralysing all sectors of the economy. This is opening the door for
unprecedented losses.

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1- The slowdown of international trade will have negative effects on traffic in the Suez

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Canal, which provided $5.2 billion in revenues in 2019.

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2- That revenue loss will compound an expected decline in remittances from Egyptians
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working in other countries. Thousands of Egyptians working abroad have returned home
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and others were expected to return when restrictions on air travel are lifted. In 2019,
Egyptians living in other countries sent home $25 billion in remittances.
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3- The suspension of flights emptied Egypt’s hotels and resorts and was projected to cost
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tourism investors dearly, especially after an injunction by Egyptian Minister of Tourism

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and Antiquities Khaled al-Anani against tourism worker layoffs.

Egyptian President Abdel Fattah al-Sisi ordered banks to extend a credit line of $1.3
billion to the tourism sector. Tourist establishments were expected to use the credit to
upgrading facilities, pay workers’ salaries and preparing for post-COVID-19 recovery.

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 The hotels and other tourist establishments have started using the suspension in
modernising themselves and preparing for the return of the tourist movement after the
current emergency comes to an end.

Some hotels have started renovations and others are offering training courses to workers.

Egypt’s museums and ancient sites have started a cleaning and decontamination
campaign. The Ministry of Tourism and Antiquities is putting some museums in order
and introducing changes to others.

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Whether such optimism holds depends on how long it will take for the COVID-19

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emergency to taper off. It will likely have serious effects on the industrial sector, which

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is heavily reliant on raw materials from China.

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4- Machines inside thousands of factories could stop whirring when raw material stocks
run out. Imports from China have stopped and will not likely resume soon. This will have
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deep effects on the industrial sector.

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Trade between Egypt and China totalled $13.8 billion in 2018, including more than $11
billion in Chinese exports to Egypt.
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5- The effects of the economic slump will be strong on millions of poor and working-class
Egyptians whose income will be drastically reduced, especially with intensifying calls for
social distancing. Thousands of businesses, including coffee shops and commercial
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outlets, have been forced to close.

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Laid-off workers who find no other means of bringing in income will likely increase the
national poverty rate of 32.5%. Millions of factory workers will have to stay at home if
Egypt imposes an all-out curfew.

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 The government introduced a rescue package that includes reducing interest rates on bank
loans by 3 percentage points and pumping billions of pounds into financial support programmes
for some sectors of the economy.

The government also formulated a plan for cash payments to self-employed people and
laborers. That plan goes hand in hand with efforts by the government to create a safety net for
the poor and economically vulnerable Egyptians.

The Egyptian economy grew 5.6% in the 2018-19 fiscal year, up from 5.3% in the previous fiscal
year. Credit rating agency Fitch Ratings said economic growth in Egypt would be 5.4% in 2019-

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20 but would pick up the following year to 5.8%.

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The Egyptian government has taken drastic measures to try to limit the scope of the outbreak,

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which has infected more than 600 people and killed over 40 in Egypt.
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Measures include the suspension of flights to and from Egypt, which froze the tourism and
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travel sector. Tourism generally provides Egypt around $1 billion in revenue each month. The
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tourism and travel sector contributes 12% of Egypt’s GDP and employs 10% of the country’s
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workforce.
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Ahmed Mohamed Alsedeik Mohamed Alazab

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31 Mar. 2020
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