Across the world, several economies have been anxious due to climate change and are working to face it with the least economic impact. Climate change is happening through different phenomena, including global warming and El Niño, which occur every few years when the ocean temperatures in the Pacific Ocean rise above normal levels. This can have a significant impact on the global economy, particularly in emerging markets. Egypt is one of the most vulnerable economies to El Niño phenomenon this year, according to an index by Standard Chartered Bank. Hence, Egypt is working on facing climate challenges economically.

El Niño Affects Egypt's Economy

Climate change will have an impact on various development sectors that will be exposed to many risks as a result of the rise in sea level, the increase in the intensity, severity and frequency of violent weather events, and the limited water resources. Ahmed Fawzy Hussein, Assistant Professor in Economics, tells Arab Finance: “Although the overall economy of Egypt may experience repercussions from El Niño, I believe that the agriculture and water sectors will be the most significantly affected due to their dependence on water availability and climatic conditions.”

In Egypt, agriculture; forestry and fishing value added represented 10.9% of gross domestic product (GDP) in 2022, according to the World Bank Data.

Hussein explains: “During El Niño occurrences, there is a greater probability of reduced rainfall and increased evaporation, leading to diminished water flow in rivers and reservoirs. This can result in a water shortage for agricultural activities, affecting crop yields and productivity. Crops vulnerable to water stress, such as rice and certain fruits and vegetables, are particularly at risk.”

Global warming is expected to reduce wheat production by 18%, maize by 14%, and rice by 11% until 2050, according to Sameh Farag Awad and Mariet Adel Metry Ebrahim's journal entitled 'Impact of Climate Changes on Different Sectors of Egyptian Water Security', published in September 2022. This will lead to a decrease in agricultural production of 8%, an increase in the unemployment rate in the agricultural sector to 39%, and an increase in food prices from 16 to 68% by 2060, while the economic losses of these damages are estimated at EGP 40-234 billion, according to the Journal.

Moreover, climate change affects the weather, which can impact tourism. Climate change affects the speed of deterioration of antiquities at high temperatures and weather conditions. Moreover, it adds pressure on investment areas and the Mediterranean coasts. The rising temperatures will also lead to the bleaching of coral reefs, which are considered a natural wealth that tourists flock to, according to ‘The Impact of Climate Change on Incoming Tourism to Egypt: A Case Study of the Suez Canal Region,’ published by the Arts and Humanities Journal.

Shady Shehada, an international trade and economics expert, tells Arab Finance: “Tourism income is expected to decrease as the number of tourists to tourist areas in Egypt will decrease. Studies and scientific research indicate that Egyptian tourism income will decrease by about EGP 19 billion in 2030 to EGP 85 billion in 2060 as a result of environmental disturbances. These losses resulting from the risks of climate change represent approximately 3.9% of the expected GDP for Egypt in 2060.”

Additionally, Hussein points out that “changes in weather patterns, such as heightened temperatures or irregular rainfall, can influence the appeal of popular tourist destinations. For instance, extreme heatwaves or a lack of rainfall can affect the condition of archaeological sites or make outdoor activities less enjoyable for tourists.”

Global warming can also impact the price of energy. It will not only affect hydropower but also oil and natural gas exploration. "Petroleum, natural gas, and biofuel production and refining also require a steady supply of water," according to the US Environmental Protection Agency (EPA). If there are disruptions to oil production or transportation, this can lead to higher prices for consumers and businesses. The impact of climate change is clear on Egypt’s energy consumption, affecting the power supply and leading to electricity cuts in July. Towards the end of July, it was announced the Egypt would import around $250 million to $300 million worth of mazut until the end of August to face the issue of power cuts, Prime Minister Mostafa Madbouly said in a televised statement.

Moreover, Shehada states that “the value of financial losses resulting from flooding facilities and roads is estimated at about EGP 1 billion annually by 2030, to around EGP 7 billion by 2060, and deaths resulting from heat pressure and breathing problems lead to losses of about EGP 24 billion by 2060.”

Facing Climate Change

One way to prepare for El Niño is to diversify the economy. This can help reduce the impact of any one sector being affected by the weather.

Shehada suggests that “the Egyptian government should take some appropriate measures to limit climate change and the El Niño phenomenon. This includes expanding tree planting, preventing forest cutting, increasing the percentage of cultivated areas on the surface of the earth, and using energy-saving household electrical appliances to reduce greenhouse gas emissions.” Shehada adds that Egypt needs to “halt urban expansion in agricultural areas; rely on solar energy and water energy, which are renewable and environmentally clean energy sources; and abandon the usual non-renewable energy sources such as oil, gas, and coal.”

Additionally, Hussein explains that “Egypt should focus on investing in resilient infrastructure, such as flood-resistant buildings and improved water management systems, to withstand extreme weather conditions associated with El Niño,” as well as global warming. The country also needs to “develop drought management strategies to minimize the impact of dry conditions and droughts on agriculture, water resources, and public health. This includes water conservation programs, alternative farming techniques, and drought-resistant crop varieties.”

Climate change and global warming can have a significant impact on Egypt's economy, particularly in the agriculture, tourism, and energy sectors. However, there are steps that can be taken to prepare for the impact of the weather, including diversifying the economy, investing in infrastructure, and developing early warning systems.

 

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