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Tensions in Red Sea to hurt Egyptian economy, say experts

Egyptian experts have said that the continued tensions in the Red Sea and the Bab al-Mandab Strait will hurt the Egyptian economy, which is suffering from high inflation and a severe shortage in hard currency.

Abu Bakr al-Deeb, an adviser to the Cairo-based Arab Center for Research and Studies, told Xinhua that some shipping companies had taken other routes and avoided the Suez Canal, one of the main sources of hard currency for Egypt, because of the ongoing tensions in the Red Sea.

The Houthis in Yemen have repeatedly attacked ships linked to Israel in the Red Sea since the outbreak of the conflict between Israel and the Palestinian Hamas group in October last year, to show solidarity with the Palestinians. In response, the United States and Britain have launched several airstrikes on Houthi military sites in Yemen’s capital Sanaa and other provinces under the group’s control since Jan. 12.

“The Houthis used to target ships that sail to Israel, sail from Israel, or are owned by Israelis. However, after the recent attacks on Yemen, the Houthis may target ships that belong to countries that support Israel, including the United States and the United Kingdom,” al-Deeb said.

The adviser said the recent attacks by the United States and Britain will push more maritime companies to change their routes and increase their insurance fees, which will boost shipping costs and goods prices globally.

He said the escalations in the Red Sea would directly impact Suez Canal revenues and harm the entirety of the Egyptian economy.

Egypt’s annual urban consumer price inflation rate in December 2023 stood at 33.7 percent, lower than the previous month but still posing enormous pressure on local consumers. And the situation in the Suez Canal is not helping.

Ship traffic in the Suez Canal, which provides the shortest sea route between Europe and Asia, had decreased by 30 percent since the beginning of 2024 compared to the same period of 2023, due to recent tensions in the Red Sea, said Osama Rabie, chairman of Egypt’s Suez Canal Authority (SCA), on Jan. 11.

He also said the U.S. dollar revenues from the Suez Canal dropped by 40 percent, and the loads shrank by 41 percent between Jan. 1 and 11, compared to the same period of 2023.

On Monday, the SCA chief stated that the authority would do everything possible to ensure smooth navigation and shipping for all vessels crossing the Red Sea, as Suez Shipyard Company, which is affiliated with the SCA, started repairing a ship damaged in a Houthi missile attack.

Mohammed Shehata, head of Egyptian Transport Association, said the Suez Canal and the Egyptian economy will be greatly affected as long as the tensions in the Red Sea and the Bab al-Mandab Strait continue.

But he claimed that the Suez route’s enormous benefits, like less distance and more favorable weather, would persuade many ships to brave the danger and pass through the canal.

Shehata also noted that the tensions in the Red Sea may force Egypt to postpone the increase in toll fees recently imposed by the SCA, to encourage shipping companies to use the canal.

“Once the tensions in the Red Sea are over, the situation will get back to normal. However, the tensions will inflict tough losses on the Egyptian and global economy amid the woes of growing inflation,” he told Xinhua. ■

Famagusta Gazette