Egypt's Tourism Revenues Dropped With 'Second Revolution,' GDP Could Take Major Hit

Egyptian tourism has declined since the country’s so-called second revolution in July, with July and August tourist revenues $600 million lower than in the same months of last year, a Capital Economics analyst said Thursday.

If Egypt’s tourist revenues remained this low for a year, the loss in revenue would equal about 1.5 percent of Egypt’s GDP, Capital Economics analyst Neil Shearing said. Until political stability returns to the region, tourist revenues will not likely improve.

Since Egypt's revolution that ousted Hosni Mubarak in Janurary 2011, militants have flocked to the Sinai Peninsula and killed Egyptian security forces and kidnapped tourists. Tourism revenues decreased by 30 percent to $9 billion in 2011, the AP reported.

In July 2013, crowds of Egyptians publicly protested the ruling Muslim Brotherhood, and the Egyptian military ousted the president, Mohamed Morsi, to suspend their consitution and set up an interim government.

The squeeze in tourism is likely to worsen strains in Egypt’s balance of payments. Further aid from the Gulf should prevent a full-blown crisis, Capital Economics says.

On Wednesday, the U.S. State Department announced a suspension in military and financial assistance to Egypt until it achieves “credible progress” in instituting a democratically elected government. Of the U.S.’s $1.3 billion aid program to Egypt, it will withhold about $260 million in economic aid and halt delivery of helicopters, missiles, jets and tank parts.

Militants have also bombed gas piplines to Israel, but that hasn't stopped BP PLC's (NYSE:BP) operations in Egypt. In September, BP found a major natural gas reserve in the East Nile Delta.

Following an announcement on Tuesday that tourist sites may soon be fitted with survelliance cameras and security, Egypt's antiquities minister, Mohamed Ibrahim, told the Egyptian Independent that "excluding the problem of Sinai, you might say [tourism in Egypt] is getting better every day."