The economics of Ramadan

The reduced energy levels - and working hours - of the month of fasting affects the stock markets.

Downtown Cairo is a boisterous place. The ubiquitous honks of the car horns and the ebullience of peoples on the street ensure that any form of silence exists only in the memory. However, for one month a year, every year, the streets go silent and the shops close for as long as the energy sapping sun stings the eyes. This is the holy month of Ramadan.

One of the five pillars of Islam, every Muslim should abstain from drinking, eating, smoking (as well as a few other things) between Fajr prayers in the early morning and Maghreb Prayers in the dusk. The Qur’an prescribes it as a way of learning self-restraint.

The eschewing of water and food, however, means that those observing the fast are also affecting their energy levels. Simply walking down the street, the vitality that would once overwhelm me is conspicuous by its absence. Those that are out languishing under the relentless Cairo sun reply to my salutations with a half-hearted wave where once I would have been invited into conversation.

In an effort to manage this problem, the Egyptian government reduces the work hours of private sector and bank workers. The reduction and/or adjustment of work hours during the month of Ramadan takes place in almost every Muslim-majority country. But whereas Malaysia and Indonesia generally practice a one-hour adjustment, one-hour reduction scheme, Egypt practices a two-hour reduction for private sector workers, a three-hour reduction for banks, as well as a one-hour reduction in their stock exchange trading hours.

This may well ameliorate the situation of fasting with the workers, but it also means that over the course of Ramadan, the private sector loses around 40 hours of operating time, the banks around 60 hours and the Egyptian stock exchange around 20 hours of trading time. 

Strangely though, the effect of losing 20 hours worth of trading time on the Egyptian stock market is minimal, if anything (see graph).  Using data from the benchmark EGX30 index – which looks at the top 30 companies in terms of liquidity and activity - between the years 2000-2006 there is absolutely no correlation between the typical monthly percentage change in stock value and the percentage change in the month of Ramadan, but it does seem to suggest that the reduced trading times has increased the market’s volatility.

 

The fact that Egypt releases its GDP and growth statistics in quarterly format mean any attempt to scrutinise the Ramadan periods within them is futile. However, the latest data released by the Ministry of Planning and Ministry of Finance can be examined as it covers the period from 1 June to the present, which encapsulates most of this month of Ramadan, plus 19 days of non-fasting.  In that time, the total GDP change has been -4.1%, which correlates to a recent report by the Dinar Standard - a research and advisory firm that focuses on emerging Muslim economies – which gave an estimate of an average loss of 4% to GDPs in Muslim-majority countries.

In that report, it estimated that Egypt made a loss of nearly 8% in its monthly GDP due to it’s reduced Ramadan hours, which would result in a total loss of just over US$1.4bn for last year’s Ramadan period. The reduction of hours may be necessary exchange for worker morale, but for an economy that is already struggling to attain the considerable US$22.5bn needed to finance its deficit for this fiscal year, it’s a hefty trade-off.

Men carry food for the fast-breaking meal. Photo: Getty
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Why it's far too early to declare Ukip dead

The party could yet thrive if Brexit disappoints those who voted Leave.

"Nothing except a battle lost can be half as melancholy as a battle won," wrote the Duke of Wellington after Waterloo. Ukip can testify to this. Since achieving its founding aim - a British vote to leave the EU - the party has descended into a rolling crisis.

Theresa May's vow to pursue Brexit, and to achieve control of immigration, robbed Ukip of its political distinctiveness. But the party's greatest enemy has been itself. Its leader Paul Nuttall did not merely lose the Stoke by-election (despite the city recording the highest Leave vote), he self-destructed in the process. Contrary to his assertions, Nuttall did not achieve a PhD, was never a professional footballer and did not lose "close personal friends" at Hillsborough. Ukip's deputy Peter Whittle pleaded last weekend that voters needed more time to get to know Nuttall. No, the problem was that they got to know him all too well. A mere three months after becoming leader, Nuttall has endured a level of mockery from which far stronger men would struggle to recover (and he may soon be relieved of the task).

Since then, Ukip's millionaire sugar daddy Arron Banks has threatened to leave the party unless he is made chairman and Nigel Farage is awarded a new role (seemingly that of de facto leader). For good measure, Farage (a man who has failed seven times to enter parliament) has demanded that Ukip's only MP Douglas Carswell is expelled for the crime of failing to aid his knighthood bid. Not wanting to be outdone, Banks has vowed to stand against Carswell at the next election if the dissenter is not purged. Any suggestion that the party's bloodlust was sated by the flooring of Steve Woolfe and Diane James's 18-day leadership has been entirely dispelled.

For all this, it is too early to pronounce Ukip's death (as many have). Despite May's ascension and its myriad woes, it has maintained an average poll rating of 12 per cent this year. This is far from its 2014 zenith, when it polled as high as 25 per cent, but also far from irrelevancy. Incapable of winning Labour seats itself, Ukip could yet gift them to the Conservatives by attracting anti-Tory, anti-Corbyn voters (in marginals, the margins matter).

Though Theresa May appears invulnerable, Brexit could provide fertile political territory for Ukip. Those who voted Leave in the hope of a radical reduction in immigration will likely be dismayed if only a moderate fall results. Cabinet ministers who boasted during the referendum of their desire to reduce immigration have already been forced to concede that newcomers will be required to fill vacancies for years to come. Ukip will be the natural vehicle for those aggrieved by Brexit "betrayal". Some Leave voters are already dismayed by the slowness of the process (questioning why withdrawal wasn't triggered immediately) and will revolt at the "transitional period" and budget contributions now regarded as inevitable.

The declarations of Ukip's death by both conservatives and liberals have all the hallmarks of wishful thinking. Even if the party collapses in its present form, something comparable to it would emerge. Indeed, the complacency of its opponents could provide the very conditions it needs to thrive.

George Eaton is political editor of the New Statesman.