Egypt to bet on tourism, energy sectors in 2018

2017/12/24 Issue: 137 Page: 18

The Arab Weekly
Amr Emam

Cairo - Developments at the end of 2017 indicate Egypt could face much rosier economic prospects in 2018 than had been ex­pected, economists said.

The signing of a protocol for secu­rity cooperation between Egypt and Russia heralds the resumption of di­rect flights from Russia to Egypt, an important milestone as Cairo seeks to restore the country’s flailing tour­ism industry.

“This would be a huge develop­ment for the recovery of the na­tional tourism sector,” said Elhami al-Zayat, the former head of the Federation of the Chambers of Tour­ism, the national guild of tourism in­vestors and workers. “The return of Russian tourists will help the sector pick up, which will positively affect economic conditions in general.”

Russia suspended direct flights to Egypt following the bombing of one of its passenger planes over Sinai in 2015. Several other Western coun­tries, including Italy, the United Kingdom and Germany, followed suit.

The resumption of direct flights between Russia and Egypt is expect­ed by February.

Egypt had seen a dramatic drop in foreign visitors since 2010, when 14.7 million tourists visited the country, bringing in around $12.5 billion in revenue. More than 10% of Egypt’s workforce is estimated to work in the country’s tourism in­dustry.

Egypt saw a decline in tourism fol­lowing the 2011 revolution, a drop exacerbated amid security con­cerns, particularly following Rus­sia’s decision to halt flights.

Egypt lost approximately $10 bil­lion in tourism revenues over the next two years as travellers shunned it for regional rivals Turkey, Greece and Israel, Zayat said.

“This exposed the vulnerabilities of the economy and deprived it of an important source of income,” he said.

The drop in tourism revenues was accompanied by a decline in remit­tances from millions of Egyptians working in other countries. Cairo borrowed $12 billion from the In­ternational Monetary Fund (IMF), a loan that came with strict restric­tions that led to Cairo cutting sub­sidies and enforcing a controversial currency flotation that resulted in a huge devaluation of the Egyptian pound.

Egypt also went on an interna­tional borrowing spree that raised its foreign debts dramatically over the past two years. They rose to $79 billion by the end of 2017 from $48 billion two years earlier.

Potentially driving the economic growth in 2018 will be the energy sector, which witnessed a major development before the end of 2017 with production from Egypt’s largest Mediterranean natural gas field, Zohr, coming online.

The field produces 350 million cu­bic feet of gas every day. While this is only a fraction of Egypt’s daily consumption of 5.9 billion cubic feet a day, it is an important addition to the country’s total daily production of 5.2 billion cubic feet.

The field’s production, experts said, would help Egypt save $750 million a year, money that would have gone to outsourcing Egypt’s energy requirements.

“This will automatically reduce pressure on the national budget,” said Osama Kamal, Egypt’s former petroleum minister. “More impor­tantly, it will be a step on the road to achieving self-sufficiency in natural gas.”

Egypt expects to achieve self-suf­ficiency in 2019 when the second phase of the development of the field is to be completed with pro­duction reaching 2.7 billion cubic feet per day.

That would allow Cairo to start exporting natural gas and secure a new and important income stream. This comes as part of a broader plan to transform Egypt into a regional energy hub.

Egypt possesses multibillion-dol­lar refining facilities that it wants to use to process oil and gas produced in the region for markets in Europe and Asia.

Saudi Arabia and Iraq had agreed to send part of their oil production to Egypt for refining and export to international markets. Greece and Cyprus will also send production from recently discovered gas fields off the Mediterranean coasts for processing in Egypt and export to Europe.

“This opens up new vistas for the Egyptian economy, ones in which new revenues from gas exports and refining can propel national devel­opment,” Kamal said.

Possible positive effects from the tourism sector revival and produc­tion from Zohr coincide with im­proving economic indicators at the end of 2017, which will potentially affect the performance of the econ­omy in 2018.

Additionally, Egypt’s annual ur­ban consumer price inflation fell to 26% in November from 30.8% in October, to the Central Agency for Public Mobilisation and Statistics (CAPMAS) said.

Core inflation eased to 25.5% in November, compared to 30.5% a month earlier, Egypt’s Central Bank said.

“The good thing about these in­dicators is that they portend strong improvements in the economic per­formance in the coming months,” said Fakhry Elfiky, an econom­ics professor at Cairo University. “These improvements will be felt by the majority of the population as commodity prices stop rising and start going down, albeit gradually.”

Amr Emam is a Cairo-based journalist. He has contributed to the New York Times, San Francisco Chronicle and the UN news site IRIN.

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