Since 2020, many African countries have struggled to recover to pre-pandemic times. The COVID-19 pandemic significantly impacted economic activities, leading to widespread job losses as government-imposed restrictions, and fear of the virus prompted people to stay home and forced businesses to close.
The economic downturn was further worsened by a global energy crisis, which unfolded unexpectedly in the wake of heightened demand for oil and gas on the international market. The crisis emerged amidst a surprise oil price war between Russia and Saudi Arabia, the world’s second and third-largest oil producers, culminating in a dramatic escalation of tensions in the first quarter of 2020. For most economies in Africa, like Egypt, it has been hard to recover to pre-pandemic times due to multiple shocks from the global market. As of today, Egypt’s economy is saddled with significant challenges that have persisted since 2020.
As Africa’s second-largest economy, the country has grappled with various economic shocks, resulting in enduring issues such as inflation, widespread job losses, currency devaluation, and a noticeable decline in living standards. The country has a uniquely diversified economic landscape, with key sectors such as agriculture, media, petroleum imports facilitated by the Suez Canal, natural gas, and tourism. However, the COVID-19 pandemic has severely impacted these sectors, disrupting supply chains, dampening demand, and severely affecting revenue streams.
The pandemic further rocked the country’s agriculture sector, causing disruptions in production and distribution due to lockdown measures and labour shortages. The media industry fell short of advertising revenues. Its Suez Canal experienced traffic volume and revenue fluctuations as international trade patterns shifted in response to the global shock. Away from the COVID-19 pandemic, factors like the Russian-Ukraine war triggered an unexpected food crisis in Egypt, which relied heavily on both countries for wheat imports. About 60 per cent of Egypt’s wheat came from Russia and 22 per cent from Ukraine.
The Suez Canal, Egypt’s ailing lifeline
The Suez Canal, stretching 193.30 kilometres, is an artificial sea-level waterway in Egypt. It links the Mediterranean Sea to the Red Sea through the Isthmus of Suez, serving as a vital trade route between Europe and Asia.
Egypt currently faces a significant challenge stemming from the ongoing conflict between Israel and Hamas, with repercussions spreading across the Middle East, notably impacting the Red Sea region. Since 2020, Egypt has heavily relied on the annual revenue of $10 billion generated by the Suez Canal, positioning it as a critical artery for global trade and an integral component of its economy.
Recent reports from local media indicate President Abdel-Fattah El-Sisi acknowledging a notable drop in Suez Canal revenues, ranging between 40-50 per cent compared to the previous year. He attributes this decline to Houthi attacks affecting shipping in the Red Sea. Furthermore, authorities disclosed in January that Suez Canal revenue had declined by 30 per cent since the beginning of the year compared to the same period in 2023.
Refugee crisis, a thorn in the flesh
For years, Egypt has provided refuge to approximately half a million registered refugees and asylum-seekers from 62 different nationalities, as reported by the UN Refugee Agency. As of October 2023, Sudanese nationals constituted the largest group, followed by Syrians. Noteworthy countries of origin also include South Sudan, Eritrea, Ethiopia, Yemen, Somalia, and Iraq.
Tensions between Israel and Hamas in the Gaza Strip have resulted in an increased flow of refugees seeking safety in Egypt as their only viable option. However, Egypt harbours concerns about the security implications of receiving these Palestinian refugees within its borders. There is concern among some quarters that militants could potentially infiltrate Egypt from Gaza. Additionally, there is a heightened concern that if Hamas were to launch attacks on Israel from the Sinai region, it could provoke retaliatory strikes from Israel within Egyptian territory. The ongoing war in the Gaza Strip and the multiple problems it poses further put a strain on Egypt and hinder its path to economic recovery.
