Has the Egyptian economy been infected by the Coronavirus?

The Egyptian Prime Minister Moustafa Madbouly asked the Economic Ministerial Committee for a comprehensive vision on the scenarios of the impact of Coronavirus on the global economy, what observers confirmed was an attempt to counter the negative repercussions of the virus. The most prominent repercussions of Coronavirus on the Egyptian economy, those that depend on the movement of travel and transfers such as tourism, employment abroad, ship traffic in the Suez Canal, foreign investment, in addition to the imported goods sector, especially from China. The Egyptian regime has announced so far 34 cases of infection with the Corona virus revealed the recovery of one of them, at a time when several countries announced the emergence of about 30 cases of the virus, for people who were on a trip to Egypt. And with Egypt announcing the discovery of the first infection with the virus, last Sunday, the main index of the Stock Exchange fell by more than 6%, and lost 32 billion pounds (two billion dollars) of its market value in one session.

Exchange rate
The first of these threats was the depreciation of the Egyptian pound (EGP) against the US dollar for several consecutive days, after a series of rises that started since January 2019 and the USD rose to 15.60 pounds, an increase of about 10 piasters, with expectations that the pound would lose some gains if foreign investment declined. A member of the board of directors of a private bank, Mohamed Abdel Aal, expected the dollar to rise in the next two weeks. He justified his expectation of declining dollar flows from global investment funds, as well as a decline in tourism revenues and exports.

Tourism experts also confirmed the abolition of many bookings from several European countries, amid fears of the negative effects of the virus on the tourism sector, which has begun to recover relatively recently and achieved 12.6 billion dollars in revenue last fiscal year. Although the spread of Corona has not been announced in Egypt (officially), the global state of caution and quarantine will affect the flow of tourists to all countries of the world, especially countries that depend on Chinese tourism. Undersecretary of the Ministry of Tourism and former head of the hotel control sector Ahmed Attia revealed that canceling reservations had already started because of Corona, most of them in the short term in March and April next, and came from four important markets, including Germany, Britain, and Greece. Attia added that tourism companies will be severely affected if the crisis persists, and no fines can be applied to cancel bookings because of the an epidemic is global, indicating that the tourism sector will bear them entirely. On the extent of the damage, Attia stressed that it is premature to talk about any numbers, especially with the age of the crisis not being determined, adding: ” But some repercussions have begun to suffer from the tourism and aviation companies and the related tourism industries.” Egypt relies on tourism as one of the important sources of foreign currency, a sector that has experienced many troubles during the past ten years.

Airlines and money transfers
Other ramifications appear in imposing severe restrictions on entry to Egypt, announced by Qatar and Kuwait. At the beginning of this month, Qatar and Kuwait decided to impose restrictions on the entry of Egyptians by issuing several measures, including stopping the issuance of all types of visas. This comes amid fears of a decline in money transfers from Egyptians abroad in the coming months, which constitute the cornerstone of foreign currency after rising to $ 26 billion in 2019. Observers also agreed that the dollar flows from its various sources will go through a wave of decline, fearing the Corona epidemic. And the number of observers, the sources of declining dollar flows, that they include tourism flows, flows from global investment funds to invest in debt instruments and the decline in commercial transactions from import and export. Also, the stopping of global trade traffic reduced the revenues of the Suez Canal in conjunction with the decrease in the passage of commercial vessels. The Egyptian Suez Canal Authority said, in a statement last Sunday, that the revenues of the Suez Canal fell to 458.2 million dollars last February, compared to 497.1 million dollars in January, as a result of the decline in global trade.

Banking stagnation
Because of the continued emergence of the virus, banks have witnessed a decline in requests to open documentary credits among merchants for import. An Egyptian banker said that the Coronavirus has led to a decline in the credits for import, especially from China, as a result of fears of the transmission of the Coronavirus, and China’s continued closure of its factories for fear of the epidemic. Industrial imports, production requirements and intermediate goods represent about 80% of Egypt’s imports from China, according to the head of the Egyptian Association for Finance and Investment Mohsen Adel. Egyptian bankers expected that the continued spread of the virus may negatively affect banks revenues, as a result of several reasons, including the decline in bank credit due to a weak trade movement, which is reflected in the decline in banks’ profits. Additionally, the commercial impact in the world leads to pressures on corporate profits.

Goods and products
The recession in credits and the decrease in importers’ demand for commodities lead to a shortage of these commodities in the markets, which leads to an increase in their prices over the medium term. The signs of this crisis began to appear in the Egyptian market, especially in the market for mobile phone products, and some home appliances that are imported, while several companies are studying the impact of their imports of raw materials as a result of the crisis.

The sector that will be most affected is tourism, due to its restrictions and concerns about the movement of people and travel between countries, then the health sector, in addition to the influence of investments and foreign trade. The effects of the Coronavirus on the Egyptian economy could be described as a “snowball” which grows day by day and the other, noting that ” the impact on Egypt differs from the rest of the world.”