The impact of the Coronavirus on Egypt
The Coronavirus broke out and developed into a global pandemic in 2019, and reached Egypt on the 14th of February 2020. Since then, many questioned the authenticity of the government’s reports on the numbers of those infected. Nevertheless, the number of cases of Coronavirus in Egypt has risen to 66,754, as well as 2,872 deaths, which is a worrying figure, especially considering the country’s economic state.
As expected, the Coronavirus outbreak has had a detrimental impact on Egypt’s economy. A new survey by the Central Agency for Public Mobilization and Statistics (CAPMAS), released on 20 June, shows that many Egyptian families have suffered a crippling financial hangover since the February onset of the pandemic. Overall, 73.5% of Egyptians say that they have experienced an evident reduction in household income caused by the pandemic. The health crisis has also put families under increased strain, with 50% reporting they have had to borrow money to stay financially afloat.
The crucially important tourism sector was the hardest hit in Egypt’s economic fallout as a result of the virus. The difficulty with the tourism sector is its interconnectedness to other industries, such as hospitality, travel, food and tourist attractions. For Egypt, estimates of the hit its tourism sector will take direct, indirect, or induced impact- during the first four months of the shutdown until June is around $5.52bn.
Small and medium enterprises, as sector-cutting across formal and informal businesses, were also heavily hit, as they did not receive much aid from the government. Furthermore, with the crisis dragging on, the implications across this sector are likely to be amplified.
Egypt’s economy has been heavily hit by the coronavirus, with various sectors feeling the effects of this downturn. Now we will look at the measures taken by the Egyptian government to curb the economic impact, and to what extent it succeeded, as well as the role of the government in aiding the spread of the virus.
How Egypt’s government responded
The Egyptian government has been heavily criticized for its response to the Coronavirus crisis, both economically and socially. The government has prioritized re-opening the economy over maintaining Coronavirus restrictions, which has only worsened the pandemic’s spread in Egypt, and therefore in practice, continues to constrain the economy. As a result, Egypt’s Health Ministry on Monday announced the detection of 1,566 new cases of coronavirus across the country.
Despite this, the Egyptian government did inject money into the economy, in areas affected by the virus, and lowered costs in others, in order to maintain economic stability. In March, President Abdel Fattah Al-Sisi allocated EGP 100bn emergency package, or about $6bn, to mitigate the adverse effects of the coronavirus. The government also lowered natural gas prices to $4.5 per million British thermal units (MBtu) for the country’s industry sector. The electricity tariff was also cut by 10 piasters for ultra-high, high, and medium voltages, in addition to holding down prices for other industrial applications over the next three to five years. Meanwhile, the government suspended taxation on agricultural land for two years.
Minister of Finance Mohamed Ma’it stated in an interview that the economic reform program Egypt applied contributed to increasing revenues more than the expenses. “Egypt managed within two years to achieve an initial surplus in revenues, and this enabled the state to allocate LE 100 billion to confront the coronavirus pandemic,” the minister stated, explaining that the Egyptian situation is stable, pointing out to the presence of goods in the markets and their good provision reduces prices. Despite this, the Egyptian economy has taken a heavy hit, and many believe, the weak state of the Egyptian economy before the virus, contributed to the big blow.
The Egyptian government has decided to open up the economy despite the continuing surge in new cases. For instance, the Egyptian government supports the technological and telecommunications projects at the New Administrative Capital (NAC) east of Cairo, despite the spread of COVID-19. Egyptian officials visited a number of projects and sites in the new capital to follow up on developments as part of the government’s plan to “coexist with the coronavirus” and resume activities. This continuation has contributed to the struggle to contain the virus in Egypt.
Despite the heavy hit taken by Egypt, there is room for optimism. The number of Coronavirus cases in Egypt during the past days has been stable, Minister of Higher Education Khaled Abdel Ghaffar, adding that this state will make the scenarios in the coming days more predictable. Egypt is expected to then flatten the curve and then to have the number of coronavirus cases rising before it starts to decrease, Abdel Ghaffar said.
However, many experts say that the economy will not fully recover unless a vaccine is found. This does apply to all the countries affected, as the virus has caused upheaval and disrupted international trade, revenues, import, and foreign-exchange reserves.
Meanwhile, El-Mallah advised that the country has to make use of trained Egyptian expatriate workers who have returned home, and their capabilities. This would ensure that production at factories will close as part of government measures, are able to restart. She also called for support for local production, as many factories rely on intermediate production inputs, and because of the temporary suspension of imports, they have shut down. El-Mallah emphasised the importance of financing for small- and medium-sized enterprises (SMEs), to speed up the development process, which has largely been ignored by the government.
The government is focusing on its main sector, and the sector worst hit, tourism, to spark Egypt’s economic recovery. President Abdel Fattah al-Sisi on Monday inaugurated two more airports near Cairo in a bid to lure tourists as Egypt aims to recover from the economic downturn caused by Coronavirus. One airport is in Egypt’s new administrative capital, about 50 kilometres to the east, that the government hopes to turn into a hub that reduces traffic in the sprawling 20-million strong megacity of Cairo. The other is called Sphinx Airport in Giza, south of the capital.
This will likely not be enough to ensure Egypt’s return to economic stability, as the government’s response has been disjointed, and much more needs to be done. However, once the Coronavirus cases stabilize, prospects of economic recovery will naturally increase.