By Christopher Le Coq/Daily News Egypt November 8, 2010, 3:40 pm
CAIRO: The Suez Canal, a major indicator for the state of Egypt’s economy, brought in $427.3 million of revenue in October, up from $398.9 during the same month in 2009, the latest figures show.
Revenue was $410.2 million in September, when the overall number of vessels passing through the canal fell to 1,513 vessels from 1,659 in August.
Madga Kandil, executive director and director of research at the Egyptian Center for Economic Studies, explained that two driving factors are behind this increase.
She first highlighted the fact that oil prices have rebounded recently, hovering around the $90 mark.
Second, Kandil continued, it shows that the global economy is genuinely picking up — in spite of the economic woes being experienced in the US and Europe, which is driving the number of shipments transiting through the Suez Canal.
Mona Mansour, director of research at CI Capital, a Cairo-based investment firm, concurred with Kandil’s analysis regarding the effect of oil prices on canal revenues, adding that the depreciation of the Egyptian pound “should have lifted our exports,” making Egypt more competitive in the global market place.
The value of crude oil moved upward, following the announcement that the US Federal Reserve would purchase $600 billion in T-bills to bolster its lagging economy.
OPEC's secretary general stated last week that $90 a barrel would not prevent the world economy from strengthening, although that price was previously considered a level that could potentially threaten global economic growth, Reuters reported.
Kandil highlighted the importance of the Suez Canal to the Egyptian economy, noting that in 2008/9 it contributed $4.7 billion in revenues to the government, representing 2.5 percent of GDP.
During 2009/10, revenue from the Suez Canal dropped to $3.3 billion, but given the upswing in current global economic activity, that figure is projected to follow current trends, which should translate into $4.9 billion in revenue for 2010/11, Kandil predicted.
CI Capital recently highlighted in a note that increases in Suez Canal revenue and oil prices will “positively reflect on Egypt’s external sector,” resulting in a 5.8 percent projected growth rate for the 2010/11 fiscal year.
According to an Economist Intelligence Unit (EIU) Country Report for September 2010, when the number of ships passing through the canal dropped by 9.6 percent in 2009/10, the Suez Canal Authority responded by freezing transit fees until the end of 2010 — they had previously been increased annually for several years — and lowered tolls for certain types of ships, such as gas tankers, which can benefit from a 10-15 percent discount.
Asked whether the transit fees and tolls would be reinstated to their previous levels due to the rebound in the canal’s revenues and more favorable global economic activity, Kandil doubted this to be the case, because of the very weak economic conditions pervading advanced western economies, adding that “no serious effort” has been made to date by the Egyptian government to make any changes to that effect.