Already facing a deep crisis, Egypt’s economy appears poised to take a hit from Israel’s war on Gaza and the spiralling tensions in the Red Sea, analysts have said.
Currently on “life support”, Egypt’s deteriorating economy suffers from growing public debt now at more than 90 percent of its gross domestic product (GDP), capital flight and the currency’s fall against the US dollar.
Now, those challenges are being compounded by the war, as it edges closer and closer to Egypt’s border, with a large chunk of Gaza’s population pushed into Rafah, after four months of displacement as a result of Israel’s relentless attacks. Tourism and the Suez Canal are two of Egypt’s major sources of foreign exchange.
Bleak outlook for tourism
Egypt’s pyramids, museums, resorts and monuments attract visitors from all over the world and have long made tourism a major source of national income. In 2022, roughly three million Egyptians worked in the tourism industry.
Before Israel’s war on Gaza erupted, Egypt’s tourism sector was already struggling to recover from COVID-19. But it appeared to be rebounding. The Gaza war and the Red Sea crisis could batter revenue prospects from this industry. According to S&P Global Ratings, Egypt’s tourism revenues are set to experience a 10-30 percent fall from last year, which could cost the country 4-11 percent of its foreign exchange reserves and shrink GDP.
“The conflict’s proximity to the Sinai peninsula has led to a sharp decline in tourism, which brought in…$13.63bn in revenue during the 2022-23 fiscal year,” Amr Salah Mohamed, an adjunct lecturer at George Mason University, told Al Jazeera.
“Although the full extent of the damage to Egyptian tourism from the ongoing conflict is difficult to quantify so far, early indications, such as a 25 percent drop in early November bookings, suggest a substantial downturn that is likely to continue if the conflict persists,” he added.
Drop in Suez Canal revenue
Since November, Egypt has been grappling with the economic impact of Houthi missile and drone attacks against Israel-linked commercial vessels in the Red Sea, which has been the Houthis’ response to Israel’s war on Gaza.
A consequence of these strikes along the shortest trade route linking Asia to Europe through the Suez Canal has been many shipping companies rerouting their vessels around the Cape of Good Hope.
In the 2022-23 fiscal year, the Suez Canal brought in $9.4bn of revenue for Egypt. In the first 11 days of this year, revenue from the Suez Canal plummeted by 40 percent compared with the same period in the previous year.
That damage has only increased since then. Egyptian authorities said revenue in January from the Suez Canal had fallen 50 percent since the start of the year, compared with the same period in 2023.
Gas sector problems
Since October 7, Egypt’s gas economy has also suffered greatly. Two days after the Hamas-led incursion into southern Israel, the Israeli defence establishment ordered the temporary halting of extractions from the Tamar gas field, located 25km (15 miles) from Israel’s southern coastal city of Ashdod.
Egypt is home to the Eastern Mediterranean’s only two gas liquefaction facilities. Israel exports its gas – including from Tamar – to Egypt, where it is turned into LNG and exported to other markets, in particular, Europe.
Because of the war, Egypt’s re-exports of gas fell by more than 50 percent in the fourth quarter of 2023 compared with that same period in 2022. This dynamic has highlighted Egypt’s economic dependence on Israel, which constitutes a huge vulnerability for Cairo at a time when tension is high in the region due to the Gaza war.
Potential influx of refugees
The fate of the 1.4 million Palestinians taking shelter in Rafah is also a source of unease in Egypt.
The government of President Abdel Fattah el-Sisi wants to prevent the influx of displaced Palestinians into the Sinai peninsula to escape Israel’s destruction across Gaza. There are already nine million refugees in Egypt, and Cairo has made clear it will not support any move that could amount to the permanent displacement of Palestinians from Gaza, which many experts fear is Israel’s game plan.
Security concerns over the presence of Palestinian fighters in Sinai, and the effects of their planned attacks against Israel on relations between Cairo and Tel Aviv, are a factor for Egypt. Economic challenges also help explain why Egypt views any forcible expulsion of Palestinians from Gaza into the Sinai as crossing a red line. Since Sudan’s conflict erupted 10 months ago, 450,000 Sudanese refugees have crossed Egypt’s southern border, which has already strained Egypt’s troubled economy.
Against this backdrop, Egypt has begun constructing a wall two miles west of the Egypt-Gaza border, potentially to forestall such a scenario. “There are those of us who fear that Israelis will destroy the existing Egyptian border fence so that they can push Gazans into Sinai,” said Patrick Theros, the former US ambassador to Qatar, in an interview with Al Jazeera.
“Egypt is building a second border wall lightly inside Egyptian territory to serve as a deterrent to the Israelis. Given Netanyahu’s desperate need to stay in power and avoid going to jail, the deterrent may not work,” he said, referring to Israeli Prime Minister Benjamin Netanyahu, whose popularity is at a record low domestically. Many analysts have argued that he needs the war to continue to avoid being removed from office. Netanyahu faces corruption cases.
“Washington’s irrational refusal to stop him may encourage Netanyahu to extend the fighting into Sinai, even if it ends the peace treaty with Egypt,” Theros said.
Managing expectations for economic reforms
Last month, US Treasury Secretary Janet Yellen met with the Egyptian Finance Minister Mohamed Maait in Washington to pledge US support for the Egyptian economy and reforms.
At the same time, there were discussions about augmenting Egypt’s $3bn loan with the International Monetary Fund (IMF) to help it cope with the war in Gaza and the Red Sea security crisis. The main elements of the economic reform package include the Egyptian government selling stakes in dozens of state-owned enterprises, subsidy reductions, moving towards a flexible exchange rate, and making the military’s role in the national economy more transparent.
Yet, analysts caution, the war in Gaza and the Red Sea security crisis coming in the aftermath of the geopolitical shocks caused by Russia’s invasion of Ukraine two years ago will probably make Egyptian officials more reluctant to implement some economic reforms.
In an interview with Al Jazeera, Ryan Bohl, a Middle East and North African analyst at the risk intelligence company RANE, said the IMF would need to be considerate of the multiple pressures facing Egyptian policymakers when making demands of them.
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
