The economic impacts of times of the emerging Corona Virus (Covid 19) are increasing at increasing rates in countries that fall into the low and middle income brackets as well as in poor countries. The controls imposed on the international travel sector, as well as the complete or partial closure imposed on companies and industries in Asia, Europe and North America, resulted in the collapse of travel traffic on a global scale, knowing that it is expected to cause a decrease in the rate of flow of remittances. Tourism and remittances are important sources of job creation and income generation for the poor, respectively. This blog is keen to evaluate the potential impacts resulting from the expected contraction of the revenue flows referred to through the use of Egypt as a case study.
Likely to cause heavy economic losses. For each month that witnesses the continuation of the emerging Corona virus crisis (Covid 19), the simulation models that we conducted based on the multiplier model based on the social accounting matrix in Egypt approved by the International Food Policy Research Institute indicate the possibility of a decline in GDP at the national level by a range ranging Between 0.7% to 0.8% (including thirty-six (36) to forty-one (41) Egyptian pounds, or 2.3 to 2.6 billion dollars). Household incomes are likely to decrease, especially among the poor.
Egypt’s star is rising among emerging economies. Despite the need to complete many reforms that have not been completed yet, the reform program launched in 2016 is close to achieving the desired results: Egypt has achieved an economic growth rate exceeding five percent (5%) over the past two years. The tourism sector recorded unprecedented revenues in 2018-2019, which is another indication of the high rate of stability. It was expected that the determined efforts to promote the business climate in Egypt would lead to more solid growth at the level of the private sector, in addition to promoting economic diversification in the year 2020 and beyond.
One can almost assert that this progress has been interrupted by the outbreak of the emerging coronavirus (Covid 19). And while the government is taking measures to contain the spread of the virus – including the suspension of international commercial flights intended to carry passengers, the closure of educational institutions and sports clubs, and the imposition of curfews at nighttime across the country – despite the low number of reported infections As compared to Egypt in a relative way at the present time compared to its counterparts in many other countries, it is expected that the global economic slowdown will have severe adverse consequences for the situation in Egypt. The slowdown in the global economy is already reducing the volume of inbound tourism to the country. The global economic slowdown is likely to cause receipts from the Suez Canal to diminish, as well as diminished remittances from Egyptians working abroad. The three mentioned sources account for 14.5% of Egypt’s GDP. In this sense, the disruption of the sources of foreign income referred to leads to wide-ranging repercussions and long-term consequences for the economy of Egypt and the Egyptian people alike.
By applying the multiplier model based on the social accounting matrix in Egypt, the individual and joint effects resulting from the decaying incident in the tourism sector are simulated, as well as the returns obtained from the Suez Canal and the decline in foreign transfers in light of scenarios with a sharp pessimistic and moderate pessimistic approach. Duplication models of the social accounting matrix are valid for measuring the direct and indirect short-term effects of exposure to sudden and sudden economic shocks that may raid the supply or demand side, such as those caused by the emerging epidemic of the Coronavirus (Covid 19). The shocks on the demand side are the expected decline in revenues from the tourism sector, the Suez Canal, and remittances.
Our findings reveal that the economy and population can have significant impacts throughout the months of the ongoing crisis. In the event that the dynamic effects resulting from the trauma of the emerging coronavirus (Covid 19) on the Egyptian economy differ from those expected based on the simulation model, then our findings may be overstated or economized in estimating the total economic impact resulting from the crisis. In addition to the above, the effects of other factors may exacerbate the consequences of the epidemic.