Terrorism and inbound tourism in Egypt: Economy‐wide and distributional impacts

• Published date: 01 August 2023
• Author: Abeer Elshennawy,Khalid Siddig
• Date: 01 August 2023
• DOI: http://doi.org/10.1111/rode.12985

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Terrorism and inbound tourism in Egypt:

Economy-wide and distributional impacts

Abeer Elshennawy

1

| Khalid Siddig

2,3,4

1

American University in Cairo,

New Cairo, Egypt

2

International Food Policy Research

Institute, Khartoum, Sudan

3

Humboldt University of Berlin, Berlin,

Germany

4

University of Khartoum, Khartoum,

Sudan

Correspondence

Abeer Elshennawy, American University

in Cairo, New Cairo, Egypt.

Email: ashenawy@aucegypt.edu

Funding information

The Egyptian Center of Economic Studies

Abstract

Following the January 2011 Revolution, Egypt experi-

enced increasing political instability and has also been

the target of intense terrorist attacks. While substantial

efforts continue to be exerted by the current regime to

put an end to these attacks, it is not clear whether the

country's reputation as a safe tourist destination will be

restored in the medium run. This paper assesses the

extent of the Egyptian economy's vulnerability to a pro-

longed tourism shock using an economy-wide frame-

work. The simulation results reveal that a shock to

tourism has a significant impact on the Egyptian econ-

omy, as a rebound of inbound tourism substantially

increases both GDP and welfare. Consequently, it pays

for the government to put measures in place to moder-

ate the effect of negative shocks to inbound tourism. A

subsidy to health tourism was found to boost both

economic growth and welfare.

KEYWORDS

Egypt, gender equality, health tourism, inclusive growth,

terrorism, tourism

JEL CLASSIFICATION

C68, O53, Q01

1|INTRODUCTION

Following the January 2011 Revolution, Egypt underwent profound political and economic

changes, with the end of three decades of authoritarian rule under Hosni Mubarak. Subse-

quently, and for the first time in Egypt's history, a democratically elected, Muslim-Brotherhood-

Received: 12 January 2021 Revised: 13 February 2023 Accepted: 23 February 2023

DOI: 10.1111/rode.12985

1910 © 2023 John Wiley & Sons Ltd. Rev Dev Econ. 2023;27:1910–1933.wileyonlinelibrary.com/journal/rode

backed president came to power, only to be overthrown by the Egyptian masses less than a year

later. On June 30, 2013, popular discontent with the policies of the president gave way to

nation-wide demonstrations. With the backing of the Egyptian army, the masses successfully

managed to end the short-lived presidency of Mohamed Morsi. The subsequent election of Pres-

ident Abdel Fattah El-Sisi aroused rage among Muslim Brotherhood followers, leading to a

series of terrorist attacks targeting the Egyptian army, the police and Coptic Egyptians, as well

as vital state entities. For example, on July 20, 2014, at least 21 Egyptian soldiers were killed in

one such terrorist attack. On August 5, 2019, at least 20 people were killed and 47 injured in

another of these attacks. Political turmoil and violence resulted in severe disruption to eco-

nomic activity, particularly in the tourism sector. With the tourism sector accounting for 10–

15% of the Egyptian economy as well as providing millions of jobs during normal times

(USAID, 2022), disruption to economic activity in general led to declining rates of growth and

rising unemployment.

Egypt has withstood multiple episodes of political and economic instability caused by terror-

ism. In many instances, tourists themselves have been the subject of these attacks.

(Morakabati, 2013).

EgyptissituatedontheAfricancontinent,which is generally perceived by tourists as

“risky”for travel due to “random”misfortune and danger (Carter, 1998). The experiences of

other countries show that tourism is relatively resilient only if terrorist acts do not occur

together at close intervals (Pizam and Smith, 2000). In Egypt between 2009/2010 and

2016/2017, the number of tourists fell by 52%, while the number of tourist nights fell by 63%

(Figure 1). It is noteworthy to mention that the Egyptian government continues to exert con-

siderable effort to put an end to these terrorist attacks, with intermittent successes. The gov-

ernment has mobilized both the armed forces and the police to crack down and arrest

terrorists. Terrorist attacks are condemned in the media and by the main religious institutions

“Al Azhar”and the Coptic Church. Nevertheless, the recurrence of these attacks –at any

point in time in the future –cannot be totally dismissed. It is thus not clear whether the coun-

try's reputation as a safe tourist destination will systemically be restored in the short-to-

medium run.

The Egyptian government has consistently shared information regarding episodes of terror-

ist attacks, with these recurrent developments raising several important questions: (1) What

magnitude of impact does terrorism levy on the Egyptian economy? (2) To what extent is the

Egyptian economy vulnerable to shocks arising from the decline in inbound tourism demand,

be it temporary or permanent? The answer to this question will depend not only on the size of

the tourism sector, but also on the inter-sectoral linkages to this sector. (3) Which factors of pro-

duction and social sub-segments of the population stand to lose the most from the decline in

inbound tourism demand (labour versus capital, skilled versus unskilled labour, female versus

male labour, the affluent versus the poor)? (4) Is it worthwhile for the government to put mea-

sures in place to moderate the effect of these negative shocks? (5) If yes, then what should the

nature of these measures be and which type of tourism (cultural, leisure or health) should be

targeted? It is noteworthy to mention that Egypt's comparative advantage in all three types of

tourism remains to date not fully exploited.

While the literature assessing the economic impact of tourism is rich, particularly with ref-

erence to the utilisation of computable general equilibrium (CGE) models in assessing

economy-wide effects, no study has focused on the economy-wide effects of the Egyptian tour-

ism sector. In general, few of these studies examine the impact of the negative shocks on tour-

ism demand arising from terrorism, and none explores the important gender dimension.

ELSHENNAWY and SIDDIG 1911