A month ago, the euro averaged LE7.4-LE7.5 in the local foreign exchange market. But it fell to LE7 this month, stoking market volatility and threatening the country's number one hard currency earner tourism. Two weeks ago, Egypt's Minister of Tourism Zoheir Garranah expected tourism proceeds to hit $13 billion this year. According to him, tourist arrivals and revenues grew by 29 and 24 per cent respectively in the first quarter of 2010. Would the prospects become grim in the wake of the euro's fallout? The answer is yes, experts say, citing the vulnerability of tourism. Depreciation of the euro has unleashed fears that tourism in Egypt might take the brunt as it is heavily dependent on the European market, analysts say. Tourism accounts for 11 per cent of Egypt's gross domestic product (GDP), and employs around 13 per cent of the country's workforce, according to official reports. There's a correlation between the euro and tourism revenues in Egypt, analysts argue. "There's a direct proportion between the euro and revenues from tourism in Egypt. Most of Egyptian hotels cash in the euro as more than 70 per cent of tourists come from Europe," Essam Helmy, a tourist expert, told the Egyptian Mail in an interview. But how would a depreciated euro pay its toll on tourist arrivals here? "Competition will be fierce among Mediterranean destinations - Egypt, Greece and Spain - to attract tourists. Travel agents are expected to slash prices, which may turn into price wars. Revenues may see a slump in the coming season," Helmy forecast. "It is possible that tourist arrivals won't decline. But revenues will fall due to euro depreciation, price wars and less tourist spending," he explained. Egypt offers a package of therapeutic, recreational, beach, safari, conference, exhibition and religious tourism. Egypt is among the top 25 destinations worldwide, accounting for one per cent of the global market, according to the United Nations World Tourism Organisation (UNWTO). Tourists visiting Egypt stand at around 25 per cent of all tourism coming into the Middle East, and 33 per cent of visitors to North Africa, according to UNWTO. It is argued that the focus should be given to opening new markets in Asia and in the Arab world. "It won't be effective in the short and medium terms. The Arab market, for instance, isn't large. The Asian market is also limited," he said, adding that tourist arrivals from the Arab world stand at around 15 per cent. "Focus may turn to the Russian market. Two million Russians visited Egypt in 2009. The number is on the rise this year. The Russian market may make it up in the short term," he said. Around 740,000 Russian tourists visited Egypt in the first quarter of 2010, jumping by a record high of 94 per cent compared to the same quarter the previous year, according to the Ministry of Tourism. "Tourism in Egypt has survived the global downturn, H1N1, the volcanic ash cloud from Iceland. We keep our fingers crossed the euro crisis will be temporary," he said. Tourist arrivals slipped by 2.3 per cent to 12.5 million in 2009, from 12.8 million a year earlier. Against the backdrop of global recession, revenues from tourism in the North African country eased slightly to $10.7 billion in 2009, from $11 billion a year earlier, according to the Ministry of Tourism. But there might be a silver lining in the clould as imports from the eurozone would cost less, one economist argue. "A depreciated euro against the Egyptian pound may negatively affect Egyptian exports. But at the same time, it would reduce the cost of imports from the eurozone member countries. This would ease pressures on Egypt's balance of trade," Sherif Shawqi, a researcher at Alexandria University, told this newspaper. Egyptian exports to the European Union (EU) totalled LE22.8 billion ($4 billion) in 2009, while imports hit $18.8 billion, according to the Ministry of Trade and Industry. "This depreciated foreign exchange of the euro would boost eurozone exports to the world. This is a positive impact of the crisis. A falling euro would increase international trade. There's no worry about that in Europe," Shawqi said. "Tourist arrivals from the eurozone may fall in the coming months. Of course, this would harm Egypt's most important foreign exchange earner, which represents around 10 per cent of the country's GDP," he explained. "Tourism has a high sensitivity to political or economic instability or currency fluctuations. The effects will be temporary unless other bigger eurozone powers like Spain or even Italy fall too. This would be very serious as it might undermine the EU for years to come," he argued. "The euro's fallout doesn't mean the dollar is doing fine. Decline in the euro reflects jitters about possible spillover to other eurozone countries. Gold is likely to soar again as investors will be seeking a safe store of value," he added.
