CAIRO – Egypt’s popular revolt has opened up new political perspectives for the biggest country in the Middle East but dealt the economy a serious blow, scaring off tourists and foreign investors. “The crisis is costing the economy at least 310 million dollars daily,” since it began on January 25, said a report from Credit Agricole, lowering a growth forecast for 2011 from 5.3 percent to 3.7 percent.
Egypt, the Arab world’s most populous nation with 80 million people, was already struggling pre-revolt with major socio-economic challenges, including high unemployment and inflation. But the government has undertaken a vast economic reform and liberalisation programme, with its public debt under control and growth bolstered by direct foreign investment and oil and gas exports.
Nevertheless, around 40 percent of the country still lives around or under the poverty line of two dollars a day, and ongoing demonstrations against President Hosni Mubarak risk further weakening the economy. Banks and businesses mostly shut down for 10 days, leading to a six-percent drop in exports in January, the industry ministry said.
The Cairo stock exchange is to reopen on Sunday more than two weeks after it closed after two frantic trading days saw losses of 70 billion Egyptian pounds, or 12 billion dollars. Chaos, fear and attacks on foreigners in Cairo and Alexandria led tens of thousands of holidaymakers to flee Egypt, where tourism accounts for six percent of gross domestic product, at the height of the holiday season.
“Prolonged political uncertainty and perceived violence could have a destructive impact on tourism earnings this year,” said Credit Agricole in its report on Egypt. The sector brought in 13 billion dollars in 2010, with a record 15 million people taking their holidays in the Land of the Pharaohs.
“Losing the winter season could mean more significant repercussions, especially if coupled with a possible summer downturn as customers, planning and booking trips now, are put off by news coverage,” said World Travel and Tourism Council spokesman Elliott Frisby. “Despite this, there is much to remain positive about. While part of Egyptian tourism may be on its knees right now, many key tourist destinations are isolated and away from the cities where incidents have taken place.”
Investors in Egypt, highly dependent on foreign earnings, will also be worried about the Mubarak regime’s almost total cutting off of Internet access over a period of five days. The cut, described as unprecedented by Internet experts, cost the country 90 million dollars, said the Organisation for Economic Cooperation and Development, and will have scared off many people thinking of working in Egypt.
Some big companies have suspended their activities, including Danish oil and marine giant AP Moeller-Maersk, cement makers such as France’s Lafarge and Italy’s Italcementi, and Japanese car maker Nissan. Companies such as France Telecom, Russian oil giant Lukoil, gas producer Novatek and German energy group RWE have evacuated some or all of their staff. “It’s not easy to gain back investors’ trust,” said Rashad Abdou, professor of Economics at Cairo University.
“As for new investors, they’ll think twice before they come to invest.” The wider world would have major cause to worry if there was any risk of the closure of the Suez Canal, from which Egypt earned 4.7 billion dollars in the fiscal year ending June 2009.
