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French bank warns Qatar siege may threaten Egyptian economy

July 27, 2017 at 12:25 pm

Image of French bank BNP Paribas [Thierry Caro/Wikipedia]

The French bank BNP Paribas stated yesterday that the Qatar siege crisis is a “potential economic threat to Egypt, given its strong presence in Doha”.

The Egyptian community in Qatar numbers around 300,000, according to Nabila Makram, the minister of immigration and Egyptian expatriate affairs.

The French bank said in a research report that the political crisis between the Gulf countries currently “has only a limited impact on the Egyptian economy”.

The report added that “the tightening of sanctions by the countries that have imposed a blockade on Qatar may prompt the latter to respond,” though it did not clarify how or when this may happen.

On 5 June Saudi Arabia, Egypt, the United Arab Emirates and Bahrain cut ties with Qatar and imposed a series of punitive measures on the Gulf state on the grounds that Qatar “supports terrorism”. Doha dismissed these accusations, which it views as “a campaign of fabrications and lies”.

Read: 4 Gulf countries sever diplomatic ties with Qatar

At the time Egypt stressed that Qatari investments were “safe and secure”.

Qatar ranks ninth among investors in Egypt with 210 companies in the country, according to the Egyptian General Authority for Investment and Free Zones (GAFI). According to official data Egypt’s imports from Qatar amounted to approximately $1.5 billion and exports were around $ 275.6 million in 2016.

BNP Paribas is of the view that “it is difficult for the Egyptian Government to meet the goal of reducing the budget deficit to less than 10 per cent of GDP” and predicted that it would reach “10.2 per cent in the current financial year 2017/2018”.

#QatarGate

The Egyptian government aims to reduce the budget deficit to 9.1 per cent in the current financial year compared to a target of 10.9 percent in 2016/2017. The financial year in Egypt begins in early July until the end of June the following year in accordance with the General Budget Law.

The report predicts that “consumer price inflation in Egypt will remain high”. Consumer price index (CPI) inflation stood at 23.7 per cent last year and is expected to reach around 25 per cent this financial year.

Read: Egypt’s Sisi vows to keep up Qatar blockade

It pointed out that “factors behind the continuous reduction in subsidies and the continued inflation in imports, and the possibility of a rise in domestic demand, will lead to a rise in inflation rates in Egypt”.

Annual inflation in Egypt stabilised at 30.9 percent year-on-year in June compared to the previous month.

In the past two months, Egypt has partially removed subsidies on fuel such as domestic gas by up to 100 per cent and increased electricity prices by 42.1 percent.

This piece was first published in Arabic in Mugtama on 26 July 2017.