Prognosis for healthier economy in 2021

 

Prognosis for healthier economy in 2021

 

 

By Ahmed Kamel

 

Tough challenges may well be on the cards for 2021 as prospects for economic growth are shrouded in mists of uncertainty worldwide.

The shadows of speculation about a new coronavirus strain loom large over the global economy at the moment.

One thing, however, is 95 percent certain: Egypt's domestic growth will be contingent on global recovery.

Therefore, local consumption and aggregate demand will be keys to survival in the event of fall-out from the mutated Covid-19.

Tourism will top the list of hurdles for Egypt and other countries that rely heavily on local and foreign visitors for employment and revenues. Alas, the recovery of the global travel industry seems a long way off.

A lasting economic recovery in 2021 will most likely come from tourism, which accounts for 14 percent of GDP.

Alongside revenues from the Suez Canal, exports and remittances from Egyptian expats, tourism ranks as one of the nation’s top hard currency earners.

Globally, lockdowns meant the absence of between 850 million and 1.1 billon international tourists worldwide, according to data from the United Nations World Tourism Organization (UNWTO), equivalent to $910 billion-$1.2 trillion in lost revenues and 110 million jobs at risk.

As for Egypt, tourist arrivals plummeted 62.3 per cent in the first half (H1) of 2020, according to the ministry of tourism.

Egypt received some 102.8 million tourists during the last decade, earning the nation $84.3 billion since 2010, according to the state-run Central Agency for Public Mobilization and Statistics (CAPMAS).  

Tourist arrivals totaled 13 million in 2019, data from the Central of Egypt (CBE) showed.

Global trade will be another key factor as Egypt’s exports will rely on market openness, especially the European Union. Exports in fiscal year 2019-2020, which ended June 30, were worth $26.3 billion.

Egypt’s non-oil exports fell by 2.5 percent to $18.7 billion between January and September 2020, year-on-year, according to CAPMAS data.

Similarly, due to lower domestic demand Egypt’s non-oil imports dropped 13.2 percent to $45.6 billion in the January- September period, down from $52.47 billion the same period in the same year, CAPMAS data showed.

Meanwhile, higher consumption rates, externally and domestically, may lift growth rates to global and local levels. An increase in domestic aggregate demand should do the trick and push the economy ahead.

Government investment should also boost economic growth as it nourishes aggregate demand. National megaprojects have been the mainstay of growth since March.

The government investment jumped 60.4 percent in the first quarter of 2020 to LE40 billion, up from LE24.9 billion in the same quarter a year earlier, according to data from the Finance Ministry.