ECONOMIC IMPACT OF CAIRO TERROR ATTACK: MODEST

UNCLAS SECTION 01 OF 02 CAIRO 002899

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E.O. 12958: N/A
TAGS: ECON PTER EG
SUBJECT: ECONOMIC IMPACT OF CAIRO TERROR ATTACK: MODEST
FALLOUT, FOR NOW

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accordingly. Not for Internet distribution.

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Summary
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1. (U) Reaction to the April 7 bombing in Cairo has been
muted on the economic front, with the stock market
registering a slight dip in the opening hours of trading on
the first day after the bombing. The downturn was quickly
reversed, however, and the market recovered the following
day. For the tourism industry, the sector most likely to be
affected by the bombing, reaction was mixed. Most travel
agents and hotel managers reported normal cancellation
levels, with some anecdotal evidence of tourists departing
immediately after news of the bombing was announced. Tourism
representatives in Upper Egypt reported no impact on their
cancellation rates. Tourism industry representatives agreed
that due to the nature of the tourism cycle, the impact of
the incident will be difficult to calculate precisely. End
Summary.

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Stock Market Dips Quickly, Then Reverse
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2. (U) Trading value on the Cairo and Alexandria Stock
Exchange (CASE) fell sharply at the beginning of the day on
Sunday, April 10, the first day of trading after the April 7
bombing. The benchmark Hermes Financial Index (HFI) fell 3.7
percent and market turnover fell 23 percent . The biggest
loser was Orascom Tourist Holdings, the share value of which
fell 20 percent. Foreign traders accounted for 12 percent of
the day's activity. The downward trend in value reversed
slightly toward the end of the day on Sunday and continued
upward the following day, April 11, with market turnover
inching up one percent and trading by foreigners increasing
to 23 percent of total trading. Most market analysts
predicted that the attack would not have a long term negative
impact on the market, especially in light of the continued
strong performance of key companies traded on the CASE and
the GOE,s quick response to the attack and discovery of the
perpetrator. Banks and exchange bureaus reported business as
usual in the week after the attack, with no increase in
demand for foreign currency.

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Tourist Reaction Mixed
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3. (SBU) Reaction from the tourist industry was mixed. The
General Federation of Egyptian Tourism Chambers held an
emergency meeting on April 10 and concluded that no industry
reaction was needed, as the attack had not had an immediate
impact on tourist numbers. Hotel and flight cancellations
had not increased, and the hotel occupancy rate remained in
the normal range for this time of year.


4. (SBU) Managers from two large Western hotel chains did,
however, report anecdotal evidence of an impact from the
attack. One hotel manager saw a large American tour group
check out and head for the airport within hours of the
bombing; the daily "no-show" rate at this hotel also jumped
from the usual 6-10 percent to 22 percent in the week after
the incident. The jump was caused more by no-shows of
business travelers than leisure travelers. Another hotel
manager reported few cancellations but noted that tour groups
have shrunk, i.e., a tour company that booked 25 rooms might
only occupy 20. The manager did note that a direct
correlation to the bombing could not be made, as spring is a
transition period for tourism in Egypt. Western travelers
begin to taper off as the spring holidays end and
temperatures in Egypt rise. They are replaced in the summer
months by Gulf Arabs escaping the scorching temperatures in
the Gulf.


5. (SBU) The Director of Public Relations for the Tourism
Federation in Luxor said that the number of visitors to that
city had not dropped off since the bombing. Tour companies
and hotels also reported no drop off in group bookings, but
hotel managers did report a few individual cancellations.
Tourism industry representatives do not expect tourism in the
Sinai or Upper Egypt to be affected by the incident in Cairo.


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Comment


6. (SBU) The muted response thus far to the incident from
the capital and foreign exchange markets indicates that
Egypt's overall economy is not likely to experience a
significant negative impact from the bombing, so long as it
is not followed by other attacks. Tourism representatives
believe that the cyclical nature of that industry will make
it hard to determine precisely the impact of the attack. In
particular, it may be impossible to judge if a mild downturn
should be attributed to the attack or to external factors
unrelated to Egypt.


7. (SBU) Most industry representatives are hoping that
foreign tourism will show the same resilience it demonstrated
after the October 2004 Sinai bombings. Those attacks
resulted in much higher casualties than the attack in Cairo.
They also received extensive coverage in the international
media, while the April 7 incident was overwhelmed by coverage
of the Pope's funeral. Despite the severity of the Sinai
attacks, foreign tourism has not suffered in the past six
months. Indeed, the contrary is true, with tourist numbers
at all time highs. End Comment.


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GRAY