The economic cost of the Paris attacks: MENA is not immune
The pyramid of Khufu illuminated with the French, Lebanese and Russian flags in Giza. (AFP/Khaled Desouki)
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It’s not only France or Europe that will suffer as a result of the November 13 Paris attacks. Businesses in the Gulf and other parts of the Middle East will be affected, too.
According to an analyst at Euromonitor International, the recent carnage that claimed 129 lives will have a wider economic impact, as people will fear traveling not just to the Schengen area, but also to the Arab region.
As a result, Gulf companies in the travel industry, including those involved in meetings, incentives, conferencing and exhibitions (MICE), can expect to see a slowdown in business. Besides, the atmosphere of fear and panic can also drag down the financial markets.
Several travel agencies in Dubai had earlier confirmed that holidaymakers from the UAE alone cancelled their trips to the French capital after the attacks occurred. Stock markets in the Gulf, including Dubai’s index, also suffered a slump on Sunday.
Kinda Chebib, senior analyst at Euromonitor International, said that arrivals from Middle Eastern countries in Paris will definitely drop over the short term, but considering the close economic and tourism ties between France and the region, businesses in the Middle East are not immune.
“The number of visitors from Europe to the Middle East is very likely to slow down in the short to medium term, as tourists will be hesitant to travel to this part of the world,” Chebib told Gulf News.
“Arab countries in general are expected to be perceived as relatively dangerous following the Paris attack [and not to mention the] Russia plane crash – both linked to Islamic militant groups. They are likely to look for alternative destinations, such as Asia Pacific, Latin America or even Africa.”
Chebib noted that 15 per cent of France business arrival came from Middle East and Africa countries in 2014. She said the increased caution in receiving tourists from the region "in the frame of MICE or business events can harm French tourism revenues, along with MEA ones."
“Tourism arrivals in MEA achieved 6 per cent growth in 2014 in volume terms and in UAE alone, 20 per cent of total arrivals are business tourism. Knowing that a big proportion of those come from European countries and in particular France, the impact on MEA economies could be devastating.”
According to Euromonitor’s data, arrivals from UAE to France grew by 2.4 per cent between 2013 and 2014.
Chebib noted that companies in the UAE and rest of the Gulf are already responding negatively to the drop in oil prices and the terrorist attacks.
“[Due to the] uncertainties, indexes dropped further this Sunday. Investment companies, including those operating in construction, real estate, energy and tourism are the most impacted. Their earnings are likely to slow down in the short to medium term as a consequence of those challenging market conditions. In particular, the drop in oil prices led to deferred payments and project declines across the GCC.”
Premjit Bangara, general manager at Sharaf Travel, said that about 30 per cent of their leisure bookings to France had been cancelled.
“The recent events in Paris will certainly have a short-term impact on the tourism industry and we will have to wait for the situation to normalize before we see bookings being firmed up for France. Large hotel chains have factored this and offered their clients full refund on cancelled bookings,” Bangara told Gulf News.
Alp Eke, senior economist at the National Bank of Abu Dhabi (NBAD), however, said that the impact on the UAE economy will be minimal
The UAE-France bilateral trade has been growing and reached $8 billion in 2014. Entrepreneurs from France, which is one of the UAE’s top ten sources of imports, have more than 600 companies established in the country.
“As for tourism, France constitutes barely one per cent of hotel establishment guests [in the country]. In my opinion, UAE is not exposed to such attacks occurring in France. The impact will be negligible on the UAE economy. UAE’s trade and economic ties are with India, China, Iran and Turkey.”
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