In the Red Sea, attacks by Iran-backed Houthi militants on commercial ships are disrupting a vital trade route and increasing shipping costs. The danger of escalating tensions in Lebanon, Iraq, Syria, Yemen and now Iran and Pakistan is increasing every day.
Despite the staggering death toll and horrific suffering caused by violence in the Middle East, the broader economic impact has so far been mostly contained. Oil production and prices, an important driver of economic activity and inflation around the world, have returned to pre-crisis levels. International tourists are still flying to other countries in the Middle East such as Saudi Arabia, the United Arab Emirates and Qatar.
Yet the economic damage to Israel’s immediate neighbors – Egypt, Lebanon and Jordan – is already severe.
One assessment The United Nations Development Program estimates that in just three months, the Israel–Gaza war has cost the three countries $10.3 billion, or 2.3 percent of their combined GDP. An additional 230,000 people are also expected to fall into poverty in these countries.
“Human development in Egypt, Jordan and Lebanon could lag behind by at least two to three years,” the analysis warned, citing refugee flows, rising public debt and declines in trade and tourism. Revenue, Forex And an important source of employment.
That conclusion echoed one Updates Last month the International Monetary Fund said it was certain to lower its forecasts for the countries most at risk when it publishes its report. World Economic Outlook at the end of this month.
The latest economic shock could not come at a worse time for these countries, said Joshua Landis, director of the Center for Middle East Studies at the University of Oklahoma.
Economic activity in the Middle East and North Africa was already on the decline, falling from 5.6 percent last year to 2 percent in 2023. Lebanon is caught in what the World Bank calls one of the world’s The worst economic and financial crisis Over a period of more than a century and a half. And Egypt is on the verge of bankruptcy.
Nearly 25,000 Palestinians have been killed by Israel since Hamas fighters attacked Israel from Gaza on October 7, according to the Gaza Health Ministry. This strip has faced destruction and devastation on a large scale. In Israel, where Hamas attacks killed about 1,200 people and resulted in 240 people being taken hostage, life was disrupted, according to officials, with hundreds of thousands of civilians called up for military service and 200,000 displaced from border areas. Have become.
IMF analysts wrote that in Jordan, Lebanon and Egypt, uncertainty about the course of the war is eroding consumer and business confidence, which is likely to reduce spending and investment.
Egypt, the Arab world’s most populous country, has still not recovered from rising costs of essential imports such as wheat and fuel, falling tourist revenues and a decline in foreign investment due to the coronavirus pandemic and the war in Ukraine.
Egypt’s debt increased due to lavish government spending on ostentatious megaprojects and weapons. When central banks around the world raised interest rates to curb inflation, loan payments increased. rising prices within egypt Households’ purchasing power and business expansion plans continue to be eroded.
“Nobody wants to invest, but Egypt is too big to fail,” Mr. Landis said, explaining that United States and IMF Are not likely Given its strategic and political importance, the country was allowed to default on $165 billion of foreign debt.
decline in shipping traffic The entry into the Red Sea through the Suez Canal is the latest setback. Between January and August, Egypt received an average of $862 million in revenue per month from the canal, which carries 11 percent of global maritime trade.
James Swanston, emerging markets economist at Capital Economics, said traffic is down 30 percent this month from December and revenues are 40 percent weaker than 2023 levels, according to the head of the Suez Canal Authority.
“This is the biggest spillover effect,” he said.
For these three struggling economies, the decline in tourism is particularly worrying. Tourism in Egypt, Lebanon and Jordan contributed in 2019 35 percent to about 50 percent According to the IMF, their combined exports of goods and services
As of early January, confirmed tickets for international arrivals in the broader Middle East region for the first half of this year were up 20 percent from last year, according to ForwardKeys, a data-analysis firm that tracks global air travel reservations. .
But the closer the fight, the bigger the drop in passenger numbers. Israel’s tourism has mostly collapsed, further damaging the economy due to the full-scale war.
In Jordan, airline bookings dropped 18 percent. In Lebanon, where Israeli troops are fighting Hezbollah militants along the border, bookings dropped 25 percent.
“Fears of further regional growth are casting a shadow over travel prospects in the region,” said Olivier Ponty, vice president of insights at ForwardKeys.
In Lebanon, travel and tourism previously contributed one-fifth of the country’s annual GDP.
“The number one site in Lebanon is Baalbek,” said Hussein Abdallah, general manager of Lebanon Tours & Travels in Beirut. The vast 2,000-year-old Roman ruins are so spectacular that visitors have suggested that jinns built a palace there for the Queen of Sheba or that aliens built it as a palace.intergalactic landing pad,
Now, Mr. Abdullah said, “It is completely empty.”
Mr Abdullah said that since October 7 their bookings have dropped by 90 per cent compared to last year. “If the situation continues like this,” he said, “many tour operators in Beirut will go out of business.”
Travel to Egypt also declined in October, November and December. Mr. Landis, at the Middle East Center in Oklahoma, noted that his brother also canceled a planned trip down the Nile River, and instead opted to spend a vacation in India.
Khalid Ibrahim, a consultant for amisol travel egypt and a member of Middle East Travel Alliance, said the cancellations began after the attacks began. Like other tour operators they offered discounts on popular destinations such as Sharm el-Sheikh on the southern tip of the Sinai Peninsula, and occupancy reached about 80 percent of normal.
He is less optimistic about saving the rest of what is considered prime tourist season. “I can say that this winter, January to April, will be quite challenging,” Mr. Ibrahim said from Medina, Saudi Arabia, where he was leading a tour. “Maybe business could drop by 50 percent.”
Jim Tankersley Contributed reporting from Davos, Switzerland.