|16 March, 2020

Coronavirus estimated to cost Egyptian economy $6.4bln in Q1

Retail, manufacturing sectors face rising input costs

A security guard at Cairo University wears a protective mask following the suspension of study for only undergraduate students amid coronavirus disease (COVID-19) spread, in Cairo, Egypt March 15, 2020.

A security guard at Cairo University wears a protective mask following the suspension of study for only undergraduate students amid coronavirus disease (COVID-19) spread, in Cairo, Egypt March 15, 2020.

REUTERS/Shokry Hussien

Coronavirus (COVID-19) outbreak is likely to cost Egyptian economy nearly 100 billion Egyptian pounds ($6.4 billion) in the first quarter with tourism, aviation and real estate sectors impacted the most, according to Abdel El Moneem El Sayed, Chairman of Cairo Centre for Economic and Strategic Studies.

"If the economic impact spills over into the second quarter, this figure is expected to double," he said on the side lines of Egypt Economic Forum last week.

Radwa el-Swaify, Head of Research at investment bank Pharos Holding said she expected the pound to hit 16.25 against the US dollar in the second quarter.

She said: "The increase in dollar price is a direct result of coronavirus hitting Egypt. [Moreover] the growth of external debt was starting to slow down; besides the Egyptian Exchange (EGX) saw negative performance during February on the back of the selling activity by Arab investors."

The chairman of Egyptian Capital Market Association (ECMA) Mohammed Maher noted that local industries could benefit from the decrease in petroleum prices due to coronavirus.

In a separate interview, Mahmoud Khattab, Chairman of B-Tech, Egypt's largest retailer for home appliances and consumer electronics, said the industry is worried about rapid spread of coronavirus globally and production disruptions at Chinese factories.

"The main fear now is how the outbreak will affect the supply chains in Egypt. We expect the retail sector to feel the impact from April 2020 when the stocks start running out," he said.

He pointed out that retailers have raised prices by up to 5 percent due to supply disruptions from China, adding that there is uncertainty about how quickly Chinese factories would be able to resume full production.

He said: "We have our own electronic brand that we manufacture locally, but we still import basic parts from China. Apart from importing finished electrical and electronic products from China, Egypt also imports components and parts used to manufacture electrical and household appliances locally."

However, B-Tech is going ahead with its plans to open 14 new outlets across the country in 2020 as part of a 400 million pounds ($25.6 million) investment programme.

"We had set a 2020 revenue target of 100 million pounds ($6.4 million), with 50 billion pounds ($3.2 million) from smartphones alone. Since these phones mainly come from China, our targets depend on how soon the coronavirus outbreak is contained," said Khattab.

Ashraf Hilal, head of the household goods division at the Cairo Chamber of Commerce pointed out that shipments of finished products from China had been stuck at Egyptian ports for more than a month due to documentation delays.

"Egyptian importers are paying storage charges to keep the goods in these ports, which would have an impact on the final prices of these products," he said.

Ahmed Sheiha, a member at the Cairo Chamber of Commerce, said delays at ports would also impact the final prices of products made in Egypt as over 80 percent of the country’s industrial sectors use components and raw materials imported from China in different proportions.

"Any delay in releasing the existing shipments at customs will raise the final product price," he said, adding that impact on prices would be visible from the beginning of April.

On Saturday, local media had reported that Egyptian President Abdel Fatah al-Sisi allocated 100 billion pounds ($6.4 billion) and announced the closure of all schools and universities across the country for two weeks as part of a comprehensive strategy to combat coronavirus. The total number of coronavirus cases in the country has touched 110, according to latest update from the Health Ministry.

(Reporting by Marwa Abo Almajd; Editing by Anoop Menon)

(anoop.menon@refinitiv.com)

#CORONAVIRUS #EGYPT #ECONOMY

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