Serrari Group

The United Nations (UN) has issued a warning that Egypt’s economy could suffer losses of up to $20 billion over the current and next fiscal years (FYs) 2023/2024 and 2024/2025 if the Gaza conflict continues to escalate. This forecast, highlighted in a recent UN study, outlines the significant economic risks posed by the ongoing regional instability.

The report identifies tourism and the Suez Canal as the two sectors most vulnerable to the fallout from the conflict. In the worst-case scenario, these sectors could see a combined revenue loss of approximately $14 billion. Tourism, a crucial part of Egypt’s economy, might experience a sharp decline in visitors due to heightened security concerns. The industry, which welcomed over 13 million tourists in 2019, is essential for foreign currency earnings and supports numerous businesses and jobs.

The Suez Canal, a vital global shipping route and a significant source of national income, could also be adversely affected. In 2022, the canal generated about $5.84 billion in revenue. However, increased regional tensions could disrupt operations, leading to potential delays or rerouting of maritime traffic, thereby impacting revenues.

In a less severe scenario, the projected economic loss would be around $5.6 billion over the same period. While this scenario presents a less drastic impact, it still underscores the substantial economic challenges that Egypt could face.

Beyond the immediate effects on tourism and the Suez Canal, the broader economic implications include potential reductions in foreign investment, increased inflationary pressures, and a strained fiscal budget. These factors could compound the difficulties for an economy already navigating various challenges.

The UN’s findings highlight the critical link between regional stability and economic health. As one of North Africa’s largest economies, Egypt’s financial stability is crucial for the broader region. Policymakers are urged to closely monitor the situation and engage in diplomatic efforts to mitigate the conflict’s economic impacts.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

20th May, 2024

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