A blow, but not a body blow
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A blow, but not a body blow

Some feared the Luxor massacre would knock Egypt's economy off course, but it is proving resilient. Fiscal discipline, low inflation and privatization have made Egypt a regional success story. Jules Stewart reports on an economy finding its feet


When Islamic terrorists gunned down 58 foreign tourists in Luxor last November, the massacre struck a blow at the heart of Egypt's booming tourism industry. At the time many thought the Luxor attack would wipe out investor confidence and derail the economic progress achieved over the past seven years since Egypt embarked on a programme of market reforms. In fact, this has proved far from the case.

Tourism accounted for $3.6 billion, or about 18%, of Egypt's foreign-currency inflows in the financial year ending June 1997 and was growing at a rate in excess of 20% per year until the Luxor attack. There is no doubt that the terrorist attack had a devastating impact on one of the country's prime sources of foreign exchange. The total damage to the economy could be as high as $4 billion and hotel occupancy rates in Luxor have plummeted to 5% of capacity, although tourism in Cairo and the Red Sea resort areas is holding up reasonably well.

"People realize that this is not Algeria," says Hamdy Rashad, chairman of Fleming Mansour in Cairo, "and that the attack does not reflect Egypt's attitude towards foreigners.

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