The war between Israel and Palestine could damage the economies of Arab economies

International credit rating agency S&P Global announced that the possibility of stopping tourism in Israel due to the war may have a “minimal” impact on the Israeli economy, but may cause major problems in Egypt, Jordan and Lebanon.

S&P estimates that a 10 to 30 percent drop in Egypt’s tourism revenue could cost 4 to 11 percent of the country’s foreign exchange reserves if the central bank decides to intervene, while Lebanon, which already has a devastated economy, it could lose 10 percent. to 10 percent of its gross domestic product and stated that there may be a 10 percent decline in domestic product (GDP).

Tourism contributed 26 percent to Lebanon’s current account balance last year, 21 percent to Jordan, 12 percent to Egypt and 3 percent to Israel. S&P said that during the 2011 “Arab Spring,” tourist arrivals fell 33 percent in Egypt and 20 percent in Jordan.

THE COUNTRY’S PROBLEMS CAN CAUSE REGIONAL IMPACT

An issue in one country can often have a regional impact, as travel companies offer packages that take foreign tourists to the region’s major historical and sacred sites, such as Jerusalem, Petra in Jordan, and the pyramids of Egypt.

S&P, which downgraded Israel from AA- to a “negative outlook” and downgraded Egypt by one notch to B- since the escalation of conflicts about a month ago, predicted a 70 percent decline scenario in tourism income.

Such a decline in tourism revenue could be similar to the decline at the peak of the Covid-19 pandemic. According to S&P analysts, this could reduce the foreign exchange reserves of Egypt and Jordan by 26.6 percent and 22.2 percent, respectively, and the GDPs of Jordan and Lebanon by 8.5 percent and 23 percent, respectively.

Analysts have noted that even a drop of this magnitude would have a “minimal” direct impact on the Israeli economy because tourism accounts for less than 3 percent of Israel’s current income. As a result, a 70 percent drop in tourism revenue is equivalent to a loss of only 2 percent in Israel’s foreign exchange reserves.

However, analysts repeated the forecast in last month’s rating that Israel’s GDP would fall 5 percent annually in the fourth quarter of 2023 due to the war. If this forecast comes true, the growth rate of the Israeli economy in 2023 could fall to 1.5 percent and its growth in 2024 could fall to 0.5 percent. (RUETERS)