Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
The war in Gaza threatens the fragile and tourism-dependent economies of Egypt, Jordan and Lebanon and raises concerns that the impact will spread to the Middle East.
In Jordan, where tourism accounts for 10 percent of gross domestic product, a tour operator said the war had triggered a series of cancellations: “Just like that, months of bookings disappeared,” he said.
In Egypt, where the government has already turned to the IMF to ease its economic crisis, many tourism bookings in Sinai, which borders Gaza, have been canceled.
“We are already seeing reports of canceled bookings in neighboring countries like Egypt,” said Farouk Soussa, regional economist at Goldman Sachs. “We expect it could cost Egypt billions in lost tourism revenue this fiscal year alone.” . Egypt does not have the necessary foreign exchange buffers to absorb such a blow.”
Noura al-Kaabi, UAE Foreign Minister, said on Friday the Gulf state was working “tirelessly” towards a full ceasefire and warned that the temperature in the region was nearing a “boiling point”.
“The risk of regional spillover and further escalation is real,” she told a conference in Abu Dhabi.
Recommended
The high civilian death toll from Israel’s attack on Gaza following Hamas’s invasion of southern Israel has dashed hopes of an economic dividend from a new era of better relations between the Jewish state and its Arab neighbors.
“There is great uncertainty about the possible impact of the war on the region’s economy,” Soussa said. “The risk of further escalation threatens to both exacerbate and extend the economic consequences.”
The crisis has already escalated, with shelling on the Israel-Lebanon border and drone and missile attacks on the Israeli Red Sea city of Eilat by Yemen’s Iran-backed Houthi militia.
Israel’s tourism-dependent neighbors Egypt, Jordan and Lebanon were already struggling before the conflict.
“Uncertainty is a killer of tourist inflows,” Kristalina Georgieva, the IMF’s managing director, said at the Future Investment Initiative conference in Saudi Arabia last week.
Lebanon, already in deep crisis, relies on tourism for about 40 percent of GDP and is now facing further economic deterioration, Walid Nassar, its tourism minister, told CNN Business Arabic.
For the Gulf petrostates, however, higher oil prices could boost government revenues hit by OPEC’s production cuts.
“But this will likely be offset by lower foreign direct investment inflows and lower tourism receipts,” said James Reeve, chief economist at Jadwa Investment in Riyadh. “Given the emphasis on economic diversification, this is the bigger loss.”
Bankers have been brutally reminded of the centrality of the Israel-Palestine conflict to Middle East politics.
Despite the war, top financiers flocked to the FII conference last week, the so-called “Davos in the desert,” seeking to use Saudi Arabia’s sovereign wealth funds to invest in global assets or seek domestic opportunities such as electric vehicle manufacturing.
Recommended
But many participants were just scrolling on their cell phones about the human tragedy in Israel and Palestine that authorities fear could slow their grandiose development plans.
In post-pandemic boom city Dubai, economic strength has been fueled by an influx of Russians fleeing war and the super-rich seeking additional housing.
Hoteliers say the Gaza war is responsible for some cancellations by Israeli and American tour groups, but few assume others will avoid the city because of a distant war on the shores of the Mediterranean.
But a major wildfire could dampen rising property valuations and cloud the busy fall period. Events featuring actress Jada Pinkett Smith and singer Macklemore have been postponed.
“Retailers are already concerned about weaker sales, particularly in the luxury segment,” an adviser said. “Some big new product launch events are being canceled – they’re all scared of what’s next.”
King Charles is expected to attend the opening of the UN climate summit COP28 in Dubai from November 30 alongside other world leaders. The British government this week raised the risk of terrorist attacks in the UAE from “likely” to “very likely”. .
Comments are closed.