Falling oil prices both blessing, curse for Egypt
As the price of oil continues to decline, Egypt stands to both gain and lose: It will save in petroleum subsidies while the job market for Egyptian oil workers in the Gulf, a significant source of remittances, will decline.
Egyptian economists are watching the decrease in oil prices with satisfaction and anticipation. Their satisfaction comes from the decrease, meaning a drop in the Egyptian budget deficit, because petroleum products were subsidized by the state to the value of 100 billion Egyptian pounds ($14 billion) during the fiscal year 2014-15. As for the anticipation, the drop will indirectly benefit the Egyptian workers in the Gulf, who are estimated to account for two-thirds of Egyptian workers abroad. Remittances from Egyptians abroad form one of the most important hard currency resources in the country.
There are also concerns about the negative repercussions on the economy of the Gulf oil states supporting Egypt, as well as concerns about the vulnerability of the Egyptian tourism industry, which recently started to recover after instability had damaged the sector.
Former Minister of Economy Sultan Abu Ali told Al-Monitor that the decline in oil prices has a direct positive impact on the Egyptian economy, namely the reduction of the cost of petroleum derivatives. He said, “Egypt has become a net importer of oil. Thus, any decline in world oil prices [means] a lower burden of energy imports.”
He added that there are also indirect negative effects as economies of the Gulf oil states, particularly Saudi Arabia and the United Arab Emirates, which have been strongly supporting the Egyptian economy, will be strongly negatively affected. Their state budgets will take a hit, making these countries less able to maintain their foreign economic support. The demand for Egyptian labor and the Egyptian workers' remittances, by extension, will also drop.
