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Monday, 17 May 2021

Egypt a member of the “fragile four” club

Egypt is one of the countries most vulnerable to a tourism slowdown: Egypt is among four “fragile” emerging economies that are particularly vulnerable to the latest outbreaks of covid-19, analysts tell Reuters. Along with Turkey, Tunisia, and Sri Lanka, Egypt is heavily dependent on tourism for hard currency. With a widening current account deficit, the country would be hard hit by another summer of weak tourism revenues.

“[Tourism] is a big topic for any country with a current account deficit,” Generali Asset Management’s senior emerging market strategist Guillaume Tresca told Reuters. “If you think about tourism in emerging markets, you have to focus on weak countries with weak external balances that rely on tourism — Tunisia, Turkey, Egypt.”

No slowdown in our crystal ball? Egypt is targeting 8 mn tourists and USD 8 bn in revenues this year, Tourism Minister Khaled El Enany told the National, a slightly more ambitious target than the USD 6-7 bn revenue goal announced by Deputy Minister Ghada Shalaby last month. Monthly tourism revenues registered USD 500 mn in April, with almost 500k tourists visiting during the month, El Enany told Reuters.

Revenues began to see a slow recovery at the end of 2020: Tourism income rose to USD 987 mn during the final quarter of 2020, up 25% from the previous quarter.

But there’s a long way to go: This was less than a third of the USD 3.1 bn in revenues booked in the equivalent period the year before. S&P Global Ratings said this month that it doesn’t expect the tourism sector to recover until 2023, contributing to current account receipts remaining below pre-pandemic levels for another two years. The government hopes that arrivals will recover to the 2019 levels of 13 mn by fall 2022.

And continued covid-19 travel curbs could hold back targets: One in three countries and territories worldwide are now closed to tourism as countries impose new travel restrictions to quell a new wave — and several new variants — of the virus, Reuters reports.

Egypt has remained only mildly affected by the latest wave: International travel between Kuwait and Egypt remains banned amid efforts to contain the spread of the virus, while Egypt is no longer on a list of countries from which travel to Saudi Arabia is banned as the kingdom resumes international flights today. The UK government advises people not to travel to Egypt and mandates a 10-day quarantine period for people traveling from the country.

It doesn’t help that Egypt's vaccine rollout is lagging behind other countries in the region: Both Egypt and Tunisia have so far vaccinated less than 5% of their citizens. This compares to 20-30% in Greece, Italy, and Spain. “[A slow rollout] is indeed a hidden risk factor economically, socially and politically for several EMs, since after a difficult 2020 it is tough to lose two seasons in a row,” Union Investment fund manager Sergey Dergachev told Reuters.

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