Egypt slowly reopens to revive pandemic-affected economy

CAIRO: Egypt's economy had just started to recover after years of political turmoil and militant attacks when the crisis hit, especially affecting its vital tourism sector.

Now the President's government has released a strict curfew for the Muslim holy month of Ramadan in an effort to boost North Africa's largest economy.

After closing stores and cafes in late March and forcing millions of officials to stay at home, he is slowly reversing some of these measures, attracting many state workers and extending business hours for stores and malls.

The blessing for the emerging economy of more than 100 million people, experts say, is that activity has continued to advance in agriculture and construction, and especially in the vast informal sector.

Twenty-five percent of the workforce is in agriculture, which is unaffected, said Angus Blair, a business professor at the American University in Cairo.

Many other companies remain open, albeit with limited staff, and construction continues.

Egypt's main sources of foreign exchange have been tourism, remittances sent home from overseas workers, and Suez Canal income, which has declined sharply during the global shutdown of travel and trade.

But more than half of Egypt's private sector is made up of the so-called informal economy, which ranges from street fruit vendors to day laborers on construction sites and one-man auto repair businesses.

Around four million workers make up this shadow economy made up of low-paid irregular workers.

The large informal sector, although encountering slower conditions, will continue to function, Blair predicted.

The challenge is enormous for Egypt, where almost a third of people live below the poverty line, many more face precarious conditions and the social order has traditionally been maintained by a strict military apparatus.

Slow growth and fewer jobs may have a temporary impact on poverty rates in the country, warned Alia El-Mahdi, a former dean of the economics and political science faculty.

The state must encourage the private sector on a macroeconomic scale so that it can overcome the crisis.

The Sisi government approved a £ 100 billion ($ 6 billion) aid package to stem the consequences of the coronavirus, which has caused 400 deaths and nearly 7,000 infections, according to official data.

This included payments of £ 500 a month to informal workers without social security to appeal.

Cairo also sought a new loan from the International Monetary Fund last month and cut its interest rates in March to encourage loans to individuals and businesses.

However, the biggest cash cow, tourism, has taken a heavy hit when the COVID-19 pandemic closed travel worldwide.

It was even more painful after the country famous for the Pyramids, Nile River cruises, and Red Sea resorts last year posted tourism revenues in excess of $ 12.6 billion, the highest in a decade. .

Mahmoud al-Dabaa, a travel agent at the popular seaside resort of Sharm el-Sheikh, said he was surprised at how the bustling travel destination had become a ghost town with deserted beaches.

It is the first time that I see Sharm completely empty like this, he told AFP.

Dabaa had hoped this season would be profitable as well, but a series of canceled bookings indicates a bumpy road to recovery.

On Sunday, the government announced that hotels can start operating again for domestic tourists, provided they remain at a 25 percent capacity limit until the end of May.

Starting in early June, this will rise to 50 percent, reflecting the authorities' confidence that they can keep infections under control while boosting the tourism sector.

Egypt expects to return to the relatively better times of recent years, which registered annual economic growth rates of over five percent.

The government has been implementing financial reforms since 2016 when it obtained a $ 12 billion IMF loan, and investors have flocked in recent years, fueling a booming construction sector.

Egypt recently ranked in the top ten countries in the Morgan Stanley Emerging Market Index in January.

Planning Minister Hala El-Saeed has estimated that the economy will slow to growth of approximately 4.5 percent in the third quarter due to the virus's aftershocks.

But Blair said he was optimistic of a gradual recovery, and considered that, if the restrictions were further loosened in June, a broader recovery in business activity could boost economic growth later in the third and fourth quarters of this year.