CAIRO - 15 April 2024: The World Bank has raised its expectations for Egypt's economic growth to 4.2 percent during the next fiscal year 2024/2025, up from 3.9 percent in its previous estimates, according to a report released by the bank, Monday.
Conversely, the bank has lowered its expectations for Egypt's economic growth during the current year to 2.8 percent from its previous estimates of 3.5 percent.
This comes against the backdrop of the geopolitical tensions in the Middle East affecting the economies of the region's countries.
The World Bank said in a recently released report that the regional economic effects of the war between Israel and Iran are uncertain in terms of magnitude and somewhat depend on whether or how the conflict escalates.
The report pointed out that tourism was one of the main channels of impact, especially in neighboring countries.
"Oil and food prices have, in fact, been declining, which helps oil-importing economies in the region," according to the World Bank report.
The report also noted various global impacts since commercial ships in the Red Sea were attacked, coinciding with the emergence of conflict, and the attacks led to a decrease in traffic through the Bab el-Mandeb Strait and the Suez Canal.
"Diversion of trade is costly as more ships and fuel are required to sustain the same flow of goods for longer routes. Insurance and shipping rates in the region have gone up and container shipping spot rates have gone up globally, especially for routes from the East to Europe," according to the World Bank report.
The report noted that five months into the conflict in the Middle East, the region continues to grapple with high uncertainty, which may worsen existing fragilities in several MENA economies.
“For example, in an economy of systemic regional importance such as Egypt, vulnerability to balance-of-payments crises could be aggravated by a longer-than-expected slowdown in maritime traffic through the Suez Canal, which has already hurt both the country’s fiscal and external accounts,” it explained, adding that the assaults on ships that have caused disruptions in the Red Sea could further lengthen shipping times and raise costs for several countries in the region. If geopolitical instability in the region increases, oil markets and capital markets could be affected, and foreign investors could be less willing to lend to the region
Neighboring countries (such as Jordan and Egypt) are more likely to be directly affected through such channels as tourism, energy commodities, fiscal pressures, and foreign exchange receipts, it noted.
In Egypt, trade disruptions from the Red Sea assaults on shipping have already aggravated supply chain bottlenecks and contributed to inflationary pressures and shortages of staples (import backlogs in ports reportedly spiked to US$7 billion at the end of January 2024, up from US$3.9 billion at end-March 2023, because there was not enough foreign currency to clear goods from ports).
In Jordan and Egypt trade in services—especially tourism—represents a major source of receipts and job creation. Additionally, street demonstrations or civil unrest spawned by the conflict in Jordan could affect its attractiveness as a tourist destination.
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