Gaza conflict puts pressure on neighbours’ economies

• Lebanon, Egypt and Jordan ‘exposed’
• Potential slowdown in tourism
• Tour agencies report cancellations

A prolonged conflict in Gaza and Israel is likely to lead to a significant contraction in GDP and loss of foreign exchange receipts across Middle East and North Africa, according to S&P Global Ratings.

The month-long conflict leaves the tourism sectors of Lebanon, Egypt and Jordan “most exposed” due to their geographical proximity to the fighting, the ratings agency said in a research note.

During the first half of the year, receipts were up more than half in Jordan and 30 percent in Egypt and were at record high levels over the 12 months to June 30 in both countries. In Lebanon, arrivals rose by a third in January-August. 

“These countries … are more vulnerable to a slowdown in tourism, given concerns about security risks and social unrest amid high external vulnerabilities,” the agency said.

• Mena growth to fall as GCC weakness exposed
• Economic activity in Lebanon remains sluggish
• Fitch downgrades Egypt on growing government debt

Tourism provides jobs for about a fifth of the population in Jordan and Lebanon. Unemployment stands at almost 30 percent in Lebanon and 19 percent in Jordan. 

In Egypt, the sector directly employs close to 10 percent of the population.

Last year, tourism contributed 26 percent of Lebanon’s current account receipts while for Jordan and Egypt, the figure was 21 percent and 12 percent, respectively.

According to the UN World Tourism Organisation, the region received 20 percent more tourists in the first seven months of this year than in the same period in 2019, making Mena the only region where tourism has exceeded pre-pandemic levels. 

“The consequences of war put this progress at risk,” S&P warned. It said its current base case is that the war will largely be contained to Israel and Gaza and last no more than 3-6 months.