OPINION - Novel coronavirus: Stress test for Egypt’s fragile economy
The heavy burdens of a looming global recession and the increase in discontent among Egyptians regarding the measures taken against the novel coronavirus (COVID-19) pandemic will challenge the durability of the regime
The writer is a researcher at the TRT World Research Centre. He holds a PhD in International Political Economy from King’s College London and specializes in global security, geopolitical risks and the politics of transnational economic affairs.
There is no doubt that the novel coronavirus (COVID-19) pandemic will put many economies across the world to a stress test. As with infected human bodies, some of these economies will be much faster at overcoming the economic challenges brought by this deadly virus, but others may need to receive intensive care for economic recovery.
Global financial markets are so far showing no sign of stability in response to the extraordinary measures taken by the governments. The financial turmoil caused by the outbreak has spread faster than the virus itself.
Experts believe that a deep economic recession is very highly likely to follow and will hit fragile economies that lack robust monetary immunity and a cushion for safety.
Egypt’s economy is one such a fragile economy. Its stability heavily depends on external funding, tourism revenues, income from the Suez Canal and petroleum and gas extraction. The global economic slowdown will hit all these sectors.
For instance, the rapid fall in energy prices will further diminish the aid and investments Egypt receives from oil-rich neighboring Gulf countries. There is also a very real possibility that revenues generated from the Suez Canal and Egypt’s hydrocarbon production will decline due to a slowdown in international trade.
Particularly, restrictions placed on international travel will have serious implications on Egypt’s tourism sector, which began to recover only two years ago following the turmoil of the Arab Uprising in 2011 and the terror attack which resulted in the downing of a Russian airliner, killing 224 passengers shortly after take-off from the Red Sea resort of Sharm el-Sheikh.
The United Nations World Tourism Organization (UNWTO) reported that tourism in Egypt generated 12.6 billion US dollars in the fiscal year 2018-19 (a 28% growth year-on-year). Hence, the report underlined a solid rebound with double-digit growth in arrivals and receipts.
In the period 2018-2019, for instance, Egypt received 11,346,000 visitors, up from 8.3 million in 2017-2018. The increase came from both traditional markets in Western Europe and emerging markets in Central and Eastern Europe, the Middle East and Asia.
While the weak Egyptian pound and aggressive promotional efforts played a crucial role in this significant rebound of arrivals, the main factor still is considered to be a return of confidence for Egypt.
However, when the emerging economic crisis related to the coronavirus pandemic couples with Egypt’s other challenges such as rising inflation, high levels of unemployment and the increase in social inequality, this confidence-generating winning streak might be expected to reverse, and the robustness of the Egyptian economy will be severely tested.
Above all, if Egypt fails to respond to the rapidly changing economic circumstances, the cost of living in Egypt will further increase, and the rate of inequality between the rich and the poor will exacerbate. This deteriorating economic situation will possibly create further challenges for the political order in the country.
This is important because economic issues have always been considered as a crucial structural driver with a high potential to bring Egyptians to the grip of partisan political feuding. If the current economic issues exacerbate and the spread of the novel coronavirus is not handled transparently, widespread unrest and nationwide protests may ensue in Egypt.
That is particularly evident when the economic policies of the current military regime under General Abdel Fattah al-Sisi are considered. The regime claimed when ousting the country’s first democratically elected civilian president Muhammed Morsi, that they would deliver “the demands of the revolution”.
The country, however, has not experienced a credible social and economic revival so far. Instead, al-Sisi not only ceased the reform process initiated after the uprising in 2011 but brought back the same conflicting policies that had catalyzed the revolution in the first place.
Of further concern is the fact that military elites have significantly increased their share of control over Egypt’s economy following the rise of President Abdel Fattah al-Sisi.
According to a report authored by Yezid Sayigh for the Carnegie Middle East Center, these elites no longer operate behind closed doors but are assuming an active role as autonomous actors that transform markets and modify the government’s policy-setting and investment strategies.
The emerging political and economic influence of the Egyptian military has no doubt imposed greater responsibility on this structure in the eyes of the masses that marched to the Tahrir Square for ‘bread, freedom, and dignity’. Fundamental economic issues, however, such as the lack of essential welfare services and support for industries to create employment, and the decrease in social equality and sustainable economic growth remain unresolved for the Egyptian masses today.
The heavy burdens of a looming global recession and the increase in discontent among Egyptians regarding the measures taken against the novel coronavirus (COVID-19) pandemic will challenge the durability of the regime.
This time the regime might have to take unprecedented steps to appease the growing resentment among the masses, which could easily aggravate the situation against their authority. While the young and dynamic population of Egypt offers vision and hope for a better future, the implications of the current outbreak of deadly COVID-19 virus might prove catastrophic for Egypt if it is not handled swiftly, wisely and effectively.
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