Winter in Egypt, 2024 - The State of the Economy

 

 

The state of the economy in Egypt is poor.  Hard currency income is down due to declines in the the tourism sector because of the war in Gaza and declines in Suez Canal transit fees owing to the Houti attacks on Red Sea ship traffic. (Reports say Suez Canal traffic is down by 42%)

Tourism accounts for about 12-13% of the Egyptian economy according to most reports.  It's size varies dramatically as things like domestic revolution, change of government and Covid occur.

We have heard that arrivals from North America and South America are down significantly as a result of the war in Gaza.  Many of those tourists normally arrive on a tour that include stops in Israel and Jordan in addition to Egypt. And then there are the people who are unfamiliar with the world map and confuse Giza with Gaza. They most definitely are not the same. In fact, it is 362 km (224 miles) via air from Gaza to Giza and 760 km (472 miles) by road. I inquired about tourism to the Red Sea resorts of Sharm El Sheikh and Hurghada and was told that the Russians are still coming but not the Ukranians.  Both cities were popular winter destinations for the citizens of those countries. 

About a year ago, the optimistic Egyptian minister of tourism, Ahmed Issa, gave a presentation noting plans to double the number of tourist arrivals by 2030 with some focus in particular on the Chinese segment of the market:

"The maximum number of tourists Egypt can attract per year currently ranges between 14-15 million," Issa explained.

"Right now we have 1,200 tourist hotels, 1,300 tourist restaurants, 12,000 tourist guides, 2,200 tourist companies, 130 archeological sites and 31 museums," he said.

"We have to double our hotel rooms, offer low-cost air travel and diversify our tourist products in order to achieve the target of attracting 30 million tourists per year," said Issa.

"Right now we are exerting greater efforts to attract more Chinese tourists to Egypt and I can say that there are around 30 million Chinese who are interested in visiting Egypt over the next few years," said Issa.

Here is a fairly recent article in English from a Chinese news source commenting on Chinese tourism in Egypt. 

One significant drain on resources that might conflict with building more tourist facilities is the vast megaproject in the desert where the New Capital is being constructed.  The Wall Street Journal has an interesting video presentation on the Capital at this link - highly recommended.

Despite all this, construction around Cairo seems to be moving ahead, especially the conversion of homes or portions of homes near the pyramids into boutique hotels.  I'll provide more news along those lines in a later post.

Gasoline prices are up about ten percent from a year ago in local currency.  Grocery prices are up significantly even extending to street vendors where some bananas and Mandarin oranges are selling at 15 Egyptian Pounds per kilogram this year versus 10 E.G.P. in the past two years.  A few key consumer items, like sugar, have either disappeared from the local markets or more than doubled in price.

Finally, let's take a look at the Egyptian Pound.  Officially, the pound remains steady at 31 EGP to the dollar - where it has been for about a year after the last devaluation.

 

The black market (which seems to have been euphemistically renamed the "parallel market") has gradually increased over that time to 40 EGP with some reports ranging as high as 50 to 55!  The British Bank HSBC was forecasting an official devaluation to the 45-50 range just over a month ago.  Many were predicting that this would take place after the Egyptian presidential election on December 11-13;  unsurprisingly, el-Sisi was re-elected with 89.6% of the vote.  This is his third term, this time lasting six years after some suitable constitutional modification.

But, so far the official exchange rate for the pound has remained at 31.