Experts from Egypt have expressed concern over the prolonged tensions in the Red Sea and the Bab al-Mandab Strait, citing adverse effects on the Egyptian economy already grappling with high inflation and a severe shortage of hard currency.
Abu Bakr al-Deeb, an advisor to the Arab Center for Research and Studies in Cairo, informed Xinhua that certain shipping companies have opted for alternative routes, steering clear of the Suez Canal—a key source of hard currency for Egypt—due to the ongoing tensions in the Red Sea.
“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 advisor anticipated that the airstrikes would prompt more maritime companies to alter their routes, increasing insurance fees and raising global shipping costs and commodity prices. This, in turn, would directly impact Suez Canal revenues and adversely affect the overall Egyptian economy.
As of December 2023, Egypt’s annual urban consumer price inflation rate stood at 33.7 percent, exerting significant pressure on local consumers. The ongoing tensions in the Red Sea have resulted in a 30 percent reduction in ship traffic through the Suez Canal since the beginning of 2024 compared to the same period in 2023, according to Osama Rabie, chairman of Egypt’s Suez Canal Authority.
Rabie further disclosed a 40 percent drop in U.S. dollar revenues and a 41 percent decrease in loads passing through the canal between January 1 and 11, 2024, compared to the same period in the previous year.
Acknowledging the impact on the Suez Canal and the Egyptian economy, Mohammed Shehata, head of the Egyptian Transport Association, suggested that despite the challenges, the canal’s advantages, such as reduced distance and favorable weather, may encourage many ships to continue using the route.
“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.
Shehata also hinted at a possible postponement of the recently imposed increase in toll fees by the Suez Canal Authority to incentivize shipping companies during these tense times. He emphasized that once the Red Sea tensions ease, normalcy is expected to return, but not without significant losses to the Egyptian and global economies amid rising inflation.