The UN Development Program (UNDP) estimates that the war in Gaza could cost Egypt’s economy between USD 5.6 bn and USD 19.8 bn — 1.6-5.2% of our annual average GDP — throughout the current and upcoming fiscal years, depending on how far the conflict escalates, according to a recent report (pdf).

Suez Canal and tourism revenues are expected to take a big hit, with the UN body penciling in a loss of between USD 3.7 bn and USD 13.7 bn during the course of the two fiscal years. The UNDP warned that lower FX inflows coupled with a widening current account deficit would strain the country’s FX reserves and increase inflationary pressures.

The war’s downstream effect on unemployment and the poverty rate is also a source of worry: The report projects an increase in the unemployment rate between 0.5-1.3% in FY 2023-2024 and a 1.3-2.5% decrease in households’ real disposable income.

The rationale: The report assesses the economic impact of the Gaza war across three possible scenarios, all backdated to February 2024. These are a low-intensity scenario in which there is little regional escalation and the war lasts six months, a medium-intensity scenario in which there is limited regional escalation and the war lasts nine months, and a high-intensity scenario in which there is more significant regional escalation and the war lasts 12 months.

What the doctor ordered: The UN recommended several policies which could mitigate the impact of the war on Egypt, including facilitating access to social protection programs, supporting the tourism value chain and shifting to sustainable tourism, and boosting the resilience of sectors most vulnerable to the crisis while doubling down on shock-proof sectors like textiles and agriculture.

Take it with a grain of salt: The report is based on information out until February 2024, meaning it doesn’t take into account the float of the EGP and the bns of funds we secured from the Gulf and international partners since then.

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