Foreign currency shortage was one of the main reasons behind Egypt’s economic reforms which were agreed with the International Monetary Fund (IMF), starting with the historical date of local currency flotation in November 2016, through to moving energy prices higher and the comprehensive economic programme.
Daily News Egypt surveyed the views of economic experts regarding the foreign reserve levels and sources, and the country’s economic outlook for 2019.
The experts interviewed by Daily News Egypt were optimistic about tourism revenues, and recommended the state authorities to continue their efforts to attract more foreign direct investments (FDIs) and boost exports as main sources of foreign currency.
The experts also expected Egyptians expats’ remittances and Suez Canal revenues to remain stable, and recommended the government not to expand in borrowing.
Egypt’s foreign currency reserves decreased to $42.5bn in December 2018, compared to $44.5bn in November 2018, according to the Central Bank of Egypt (CBE). This drop in the foreign currency reserves was due to the government’s repayment of loans and treasury bills.
- Tourism revenues approach 2010 levels, up to $12bn
Former Chairperson of the Egyptian Tourism Federation (ETF), Elhamy El-Zayat, informed Daily News Egypt that the country’s tourism revenues are expected to continue to revive until the end of 2019, forecasting that the promising sector’s revenues would reach $12bn this year, which is very close to 2010’s revenue rates.
On 13 December 2018, the cabinet announced that Egypt’s tourism revenues in the fiscal year (FY) 2017/18 jumped to $9.8bn from $4.4bn in FY 2016/17, an increase of 123%. The tourism revenues in 2017 alone were $7.6bn, up from around $3.5bn in 2016.
The tourism revenues during the first half (H1) of 2018 reached $4.8bn, Reuters reported, adding that the number of tourists increased by 41% to reach around 5 million visitors, up from 3.6 million visitors in the same period in 2017.
In September 2018, Egypt was declared as the fastest growing tourist destination in terms of the year-over-year (y-o-y) increase of visitors, according to the United Nations World Tourism Organisation (UNWTO)’s 2018 report on global travel and tourism.
The report noted that Luxor and Giza were on the top of Egypt’s most famous and well-known cities for tourists’ choice.
According to the Minister of Tourism, Rania Al-Mashat, Egypt is working on creating its own trademark features at international exhibitions. Branding by destination is one of the methods Egypt is counting on to market tourist sites, such as Siwa Oasis, Luxor, Aswan, and Sharm El-Sheikh, all intended to display the country’s diversity, Al-Mashat added.
Russian flights resumed last year to the Cairo International Airport (CAI) after years of a travel ban following the crash of a Russian plane over the Sinai Peninsula at the end of October 2015.
Egypt’s cultural tourism will also highly contribute to increasing revenues, even more than beach tourism, mentioned El-Zayat, adding, “the number of tourists in 2010 recorded 14.7 million visitors. However, I do not think this figure can be achieved in 2019. I hope the British airlines resume flights to Sharm El-Sheikh as it will positively affect the number of tourists.”
The Egyptian airports have adopted the highest security procedures, affirmed El-Zayat, adding that the Russian security delegations which visited the CAI, praised the security level.
Egypt was named among the “best 19 places to visit in 2019” by CNN, coming second on the list before Fukuoka in Japan and Ghana, according to a media report on 4 January 2019.
“Mummies, sphinxes, tombs, and fresh mysteries of the Giza Pyramids have all been unearthed over the past year, as Egypt proves again it has many more secrets yet to be revealed,” the report stated.
“And while safety concerns persist, hundreds of thousands of visitors to the Pyramids of Giza, the Great Sphinx, the Valley of the Kings take place without incident each year. Likewise, Egypt’s main Red Sea resorts are considered safe,” mentioned the report.
- Egyptian exports await future rise
The Export Development Authority’ (EDA) efforts have contributed to increasing Egypt’s exports to $25bn in 2018, the Minister of Trade and Industry, Amr Nassar, said on 11 January 2019, noting that the list of Egyptian exports was topped by chemicals, fertilisers, food industries, and ready-made garments.
Nassar added that the ministry is coordinating with members of Egypt’s ministerial economic group to set up a strong and effective strategy to boost exports in 2019.
The strategy will focus on introducing a comprehensive vision for the country’s key export sectors and finding solutions to all challenges facing Egyptian exports in various international markets, he said.
Economic expert Youmn El-Hamaki hailed the governmental efforts to boost exports, adding that supporting exports would increase foreign currency flow into the country over the next years, however it requires a comprehensive strategy for local manufacturing and investment.
“Hot money like tourism revenues aren’t sustainable sources as they are related to politics and interest rates,” said El-Hamaki, mentioning that tourism is a major source of foreign currency but the past experiences proved that it was not reliable.
El-Hamaki affirmed the importance of increasing the competitiveness of Egyptian products, so that they can get in to the key markets, such as the European Union (EU).
The annual ready-made garments exports can reach $30bn compared to current average of $3bn, affirmed El-Hamaki.
The minister of trade affirmed in his recent statements that the coming period will witness a comprehensive review of all export-related measures with the aim of eliminating bureaucracy which would positively affect exports.
The CEO of EDA, Sherine El-Shorbagi, said in December 2018 that the authority was working to increase exports by 10% annually, adding, “the exports will increase in 2019, and we are working on bringing them to $1bn in Africa, as our exports to Africa increased by 20% up to $862m in 2018.”
- MIIC continues its efforts for attracting FDIs
The Egyptian authorities will face a big challenge to boost FDIs in the next period, despite the governmental recent efforts to improve the investment climate, mentioned El-Hamaki adding, “many of the current investments focus mainly on the oil and gas sector.”
Over the last two years, the Egyptian government implemented a number of regulatory reforms, including the Investment Law and the Companies Law, with the aim of improving Egypt’s ranking in international reports of doing business and to help bring the economy to its full potential.
These reforms have led to noticeable improvements in investors’ confidence and put Egypt on the right path towards stability and development. The Investment Law provides a new framework for the government to offer investors more investment-related incentives and guarantees.
Above all, the new law aims to attract new investments, consolidate many investment-related rules, and streamlines procedures.
Sherif El-Diwany, former head of Middle East and North Africa at the World Economic Forum in Geneva, praised Egypt’s governmental efforts to enhance the investment climate and attract more FDIs.
“The huge amounts of hot money entered the stock market, yet what we need is to turn them to real investments that can create job opportunities,” El-Diwany added.
According to the CBE, the FDIs fell by 40.3% in the first quarter (Q1) of FY 2018/19, in comparison with the same period of the last FY. FDIs in Q1 of FY 2018/19 were $1.1bn compared to about $1.8bn in the same period of FY 2017/18.
Shuaa Capitals January report said “we believe Egypt’s usual challenges hindering investments are not the key driver behind the recent slump. We think they do play a role, especially at a time when Egypt is losing key competitive advantages, such as cheap energy, with the subsidy cuts.”
“However, we see the decline in FDIs as a global phenomenon following the recent global developments. We are afraid this may not be the last reporting period to witness such a trend, but we hope H1 of 2019 will hold better surprises for emerging markets in general and Egypt in particular,” mentioned the report.
El-Diwany pointed out that the main ministries that should lead the Egyptian economy are the Ministry of Investment and International Cooperation (MIIC) and the Ministry of Trade and Industry, explaining that exports and investments are main pillars for boosting Egypt’s foreign reserves in 2019 and the years beyond.
“I think that Egypt’s exports of energy and gas will support the foreign reserve levels of the country in 2019,” mentioned El-Diwany
- Egyptians expats’ remittances, Suez Canal revenues to stay stable
Remittances from Egyptian expatriates rose by 8% during the first 10 months of 2018, reaching $21.4bn, compared to $19.8bn in the same period of 2017, the CBE revealed on 22 December 2018.
El-Diwany noted that remittances from Egyptian expatriates will stay stable in 2019, despite its latest increase, noting that the Ministry of Immigration and Egyptian Expatriates Affairs plays an important role to benefit the economy from the Egyptian expatriates.
However, El-Diwany noted, “if we achieved the maximum of tourism revenues, remittances, and Suez Canal receipts, we will not be able to fulfil our needs of foreign currency,” affirming the importance of boosting FDIs and exports.
In December 2018, the Chairperson of the Suez Canal Authority, Mohab Mamish, expected that the Suez Canal receipts would hike up to $6bn at the end of 2018, compared to $5.3bn in 2017, adding that there is no intention to increase the transit fees so that the canal could remain cheaper, shorter, and safer than any shipping route.
“Any increase in the fees may cause prompt shipping lines to alternative routes in the light of recent fluctuations in oil prices,” he mentioned.
- Loans are fine but not reliable
El-Diwany said that all countries borrow to finance their needs even the large ones, including the US and China. However, Egypt should not count on loans as a main source for funding, adding that FDIs are more reliable as they provide jobs and boost the GDP growth.
Egypt’s foreign debt reached $92.6bn at the end of June 2018, recording an increase of $13.6bn, or 17.2%, compared to June 2017.
Meanwhile, Egypt continues its negotiations with the IMF to receive a $2bn tranche of the agreed $12bn loan, said the Minister of Finance, Mohamed Moeit, in January.