A study reveals Corona's impact on the Egyptian economy

The Corona virus is one of the most serious shocks to the global economy at the
present time, as all previous financial crises faced by governments through
economic policies, while the Corona crisis threatens the human resource in a clear
and direct way, and therefore its repercussions are the most dangerous to the
global economy and require policies Different to face.

The situation in Egypt differs, as it is safe from the direct impact of the crisis, in
light of the precautionary measures taken by the government, but it is not
possible to predict the rapid spread of this virus during the coming period.

And with the assumption that the impact of infection and the possibility of
controlling the virus will diminish, but there are many channels for the
transmission of the impact of this crisis to the Egyptian economy, especially in
light of the high degree of exposure to the Chinese economy, China usually comes
as the most important trading partner for Egypt, whether at the level of goods or
services As well as capital transfers.

And it monitors a report issued by the Cairo Institute for Economic Studies,
obtained by "Al-Ain News", a copy of it, the most important channels for the
transmission of the crisis to the Egyptian economy, in an attempt to extrapolate its
impact:

Merchandise imports

The structure of Egyptian imports from China affects the low elasticity of demand
for these imports, as industrial imports, production inputs and intermediate goods
account for about 80% of the volume of imports, and then there is difficulty in
rationalizing or replacing them with domestic production, at least in the short
term.

With the passage of time and the decline in stockpiles of raw materials in factories
and companies, it is necessary to search for alternative markets, and then this
may be an opportunity for the local product to replace imports.
An opportunity for exports

There is more opportunity for Egyptian exports to gain access to new export
markets, given the decline in Chinese exports to it.

Oil prices

Expectations of lower growth in China were reflected in the decline in world oil
prices, and the US Energy Agency reduced its forecast for global oil demand
growth for 2020, with the outbreak of the virus affecting consumption rates in
China.

This will affect oil pricing in Egypt, especially after announcing the application of
the automatic pricing mechanism to some petroleum products since July 2019,
and reviewing them every quarter, according to the development in the global
price of a barrel of Brent crude, and the price of the dollar against the pound.

Remittances of Egyptians abroad

Despite foreign employment reduction programs and job localization policies

adopted by the Gulf states for some time, the total transfers of Egyptians working
abroad increased to $ 6.7 billion during the first quarter of the current fiscal year
2020/2019, in the period from July to September, with an increase of 13.6% On an
annual basis, at a value equivalent to $ 803.6 million.

It amounted to about $ 5.9 billion during the same period in the previous fiscal
year, but it is expected that these countries will adopt deflationary policies in
response to the decline in oil prices and reduce spending rates, which may affect
Egyptians ’remittances abroad in the coming period.

stock market

The Egyptian Stock Exchange dealings were affected during the recent times
negatively by the developments of the global economy, the fluctuations of
emerging markets, and the declines witnessed by Arab and international
exchanges during the recent period, due to the escalation of the trade war
between America and China, the volatility of oil prices, geo-political tensions, and
the direction of central banks Globally towards reducing interest rates in light of
facilitating the global financial situation.

Hence, there are fears of a decline in the performance of the Egyptian Stock
Exchange in light of the turmoil in the financial markets with the fears of the
Corona virus, in addition to the impact of the psychological factor that plays a big
role on the behavior of Egyptians dealing in the stock market, as they initiate
selling trends in times of crisis, which is evident In many previous crises, whether
local or global.

Direct investments

The number of companies established with the General Authority for Investment
and Free Zones of the State of China is 1560 companies, with a total investment of
854 million dollars and 35,000 dollars. China is one of the most important
investment partners with Egypt, and its ranking is 21 among the investing
countries.

It is difficult for these investments to be affected by the Corona crisis due to its
stability, compared to the investments of securities portfolios that are subject to
fluctuations and fluctuations from time to time depending on the wishes of
investors and short-term developments.

Long-term investments vary between the industrial sector, with a total number of
807 companies, and the service sector with a total of 518 companies. About 79
companies operate in the construction sector, 85 companies in the
communications and information technology sector, 52 companies in the
agricultural sector and 19 companies in the tourism sector.

tourism

This sector is one of the sectors most vulnerable to fluctuations and affected by
shocks, and then it is expected to exacerbate the impact of the decline in tourism
from East Asia, which is one of the most promising tourism markets, and the
negative impact extends to the related services such as airlines, hotels and retail,
and employment.
Basket of currencies

The Central Bank of Egypt should review the relative weight of the Chinese yuan in
the components of the currency basket in light of its declining value, to hedge
against fluctuations in the coming period.

It should be noted that the Egyptian economy is distinguished by its diversity, as

well as the economic reforms that have resulted in the recovery of most of the
economic indicators, which enables it to avoid the negative effects of the Corona
crisis and its repercussions on the global economy, but to benefit from the crisis in
many promising sectors.

In particular, the outsourcing sector, in which Egypt enjoys competitive

advantages, most notably human capital and competitive operating costs, which
enabled it to occupy an advanced position in the global outsourcing industry
market, as Egypt's share in outsourcing services for information technology and
services based on it reached 16% by the end of this year.