Egypt cannot fill Turkey-Russia trade gap: Analysts

ANKARA

Egypt is bidding to fill the trade gap with Turkey caused by Russian sanctions in the wake of the shooting down of a Russian fighter jet which violated Turkish airspace on Nov. 24.

“Egypt cannot fill the trade gap left by Turkey,” Edward Coughlan, head of Middle East & North Africa Analysis at BMIResearch in London told Anadolu Agency on Monday.

“I think this is wishful thinking,” agreed Jason Tuvey, an economist with Capital Economics in an interview with Anadolu Agency on Monday.

Cairo asked Moscow to provide it with a list of goods recently prohibited or restricted for import to Russia from Turkey to replace them Egyptian goods, Egypt's Ministry of Industry and Foreign Trade said in a statement Sunday.

“Egypt is interested to meet the needs of the Russian market in goods, especially those that came from Turkey, in light of Russia's decision to limit the Turkish imports to the Russian market in fruit and vegetables to 66 percent, as well as in clothing and leather," the statement said.

But Coughlan warned that Egypt cannot produce the goods needed to fill any gaps that may arise.

“The sectors of the economy that will be under sanction are not clear at the moment but it looks like agricultural products will be the largest. Egypt is an importer of food so the country is unable to fill this. If textiles and manufactured goods are targeted then this is at least an area Egypt does export - however, the spare capacity to increase exports is minimal and we would have to see sanctions in place for at least a year before Egypt could increase production,” Coughlan said.

“It would be useful for Egypt to increase exports to help the economic recovery but structural issues such as power shortages and an overvalued currency mean output and trade and muted. For these reasons export growth has been minimal and unemployment is around 13 percent, having fallen only slightly over the past three years.”

Further, the largest share of Turkish exports to Russia consists of products Egypt does not produce.

“Most of Turkey’s exports to Russia consist of intermediate manufactured parts and it’s not clear whether these will be sanctioned given the possible adverse consequences for Russian firms. Even if they were, Egypt will not necessarily be the beneficiary of Russian firms having to find these parts from elsewhere,” Tuvey said.

The Egyptian economy is fragile in any case. As the most recent report from the Organization for Economic Co-operation and Development published on July 21, stated:

“Economic recovery remains fragile due to: i) high inflation rate estimated at 10.1 percent in fiscal year 2013/14; ii) a budget balance still projected to show a deficit of 11 percent of GDP in fiscal year 2014/15; iii) the country’s high outstanding public debt to GDP ratio, up to 97 percent in June 2014 from 94 percent a year earlier; and iv) Rising unemployment rate reaching 13.3 percent in 2013 from 9 percent in June 2010.”

Any response from Egypt in this context would be quite limited, Tuvey noted.