Cairo- The Gaza ceasefire agreement opens new opportunities for the Egyptian economy, as it is expected to witness a noticeable improvement in various sectors, starting from the Suez Canal to tourism and direct and indirect foreign investments, according to observers.
Egypt and the world are looking forward to the return of traffic in the Red Sea to normal, from the Bab al-Mandab Strait all the way to the Suez Canal, which suffered heavy losses last year, affecting one of the country’s most important sources of hard currency.
Egyptian President Abdel Fattah El-Sisi said at the end of last year that his country had lost about $7 billion in canal revenues during 2024 due to “regional challenges,” which represents a decline of more than 60% compared to 2023.
The International Monetary Fund stated – last month – that the Red Sea tensions have caused Egypt to lose 70% of the canal’s revenues, which is a major source of foreign currency, since the Houthis in Yemen began attacking ships heading to Israel in the Red Sea.
About 15% of global maritime trade passes through the Suez Canal, the shortest gateway between Europe and Asia, and its return to its path contributes to increasing dollar revenues and supports the stability of the pound (the local currency).
The Suez Canal is the most affected
Egypt has completed the trial operation of the Suez Canal duplication project, at the end of 2024, which will increase the duplication area by 10 km, making its length 82 km instead of 72 km, which will contribute to increasing the canal’s carrying capacity.
Egypt’s balance of payments – with the outside world – turned into a deficit that contributed to the decline in petroleum exports and Suez Canal revenues, which fell by 61.2% between July and September of last year, to record $931.2 million compared to $2.4 billion, according to data from the Central Bank of Egypt.
However, these pressures may witness a noticeable change with the announcement of a ceasefire in the Gaza Strip, according to experts and analysts who spoke to Al Jazeera Net. However, this positive change depends on the steadfastness of the agreement, the completion of all its stages, and the end of the war.
Before the ceasefire, the leader of the Houthi group in Yemen, Abdul Malik al-Houthi, said, “We will remain abreast of the stages of implementing the agreement, and any Israeli retreat or massacres and siege, we will be ready directly to provide military support to the Palestinian people.”
Calming the situation in the region would also attract more foreign direct investments, enhance confidence in the Egyptian economy, and encourage growth in other sectors such as tourism.
Traffic through the canal improved in 3 stages
Ahmed Al-Shami, a maritime transport consultant and transport economics expert, expected that the improvement in the number of ships passing through the Suez Canal would gradually increase, and he divided it into 3 stages:
- The first period will continue until the end of next March, during which international trade is usually weak. It is a testing stage for the large shipping companies that changed their route to the Cape of Good Hope route, and therefore any improvement will be very slight.
- The second phase extends from the beginning of April until the end of June, and depends on the stability of the first phase and will witness a growth in ship traffic, but it is a cautious passage.
- As for the third stage, it will constitute a breakthrough in the return of ships to normal if the first and second stages pass without major violations of the Gaza Agreement, and thus the escalation does not return again in the Red Sea.
The maritime transport consultant went on to say that the Suez Canal may witness a greater increase in ship traffic than it was before the geopolitical tensions in the region at the end of 2023, for reasons related to the vibration of global supply chains for more than a year, the length of the alternative route, the rise in inflation in the world, and the increase in transport prices.
Sectors benefiting from the ceasefire in Gaza
At the level of other economic sectors in Egypt, banking expert Sahar El-Damaty expressed her optimism about the positive effects on the Egyptian economy with the announcement of reaching a ceasefire agreement in Gaza and the exchange of prisoners.
She confirmed in statements to Al Jazeera Net that “repeated conflicts in the region, such as those witnessed in Gaza, Lebanon, Syria and Yemen, leave an environment that is not attractive for investment, due to instability and uncertainty,” noting that talk about changing the map of the Middle East and ongoing conflicts makes investors hesitate to pump their money into the country. Area.
Al-Damaty added that the end of these wars will help restore direct and indirect foreign investment, grow vital sectors such as tourism, and increase local industrial production after reducing production costs that were affected by the high cost of transportation across the Red Sea.
She noted a slight improvement in net foreign direct investment flows in Egypt to $2.7 billion from $2.3 billion in the period between July and September 2024, and expected the flows to witness a greater increase.
The Central Bank of Egypt said last Thursday that the current account deficit amounted to $5.9 billion in the same period, compared to $2.8 billion in the same quarter a year ago. However, remittances from Egyptians abroad – which increased to $8.3 billion in the same period compared to $4.5 billion a year ago – contributed to compensating it. Channel revenues decline.
