The ongoing political stalemate in Egypt is costing the country at least $310m a day, according to a recent research note.
Credit Agricole has said that it is revising its GDP forecast for the country to 3.7 percent from 5.3 percent, with tourism being particularly badly affected.
“Tourism accounted for 6 percent of GDP in 2010 and accounts for one out of eight jobs in Egypt with important multipliers for the economy as a whole,” the bank said, in its January emerging markets focus.
“Tourism receipts could easily retract to pre-2004 levels of less than $5.5bn. The extent of political unrest will have an impact on tourism arrivals as well as the amount of time tourists spend in Egypt.”
Credit Agricole also said that there was a significant risk of capital flight, particularly in the short term.
“Local as well as international investors will demand an early exit as political instability and lack of clarity looms,” the bank said. “Those that have not opted for capital outflow strategies over the past few years will do it now, particularly among the business community and minorities.”
Worse still, the bank warned that the increased cost of government borrowing would push budget deficits even higher.
Credit Agricole said its previous base case scenario for the next three years saw gross public debt to GDP staying at around 70 percent.
“We now think this scenario is no longer viable and we expect that public debt will revert to 85 percent this year and 97 percent by 2014,” the report said.
Furthermore, the bank also warned that several planned fiscal reforms might not be carried out this year, restraining the government’s revenue options still further, and pushing the budget deficit down to 12.3 percent, from an estimated 8.2 percent.
Follow us on
