CAIRO: Egypt’s Suez Canal Authority posted July numbers that signal a steady rebound for one of the government’s primary income sources.
Revenue for the canal in July hit $382.9 million, about a 10 percent jump from $348.2 million in June. Revenue in June grew 1.7 percent month on month, so July numbers indicate that revenue is rebounding at a faster rate.
Not only is this good news for Egypt, but a month on month increase in canal revenue indicates a rehabilitation of global trade, which many see as a sign that the global economy may be emerging from recession.
“Fiscal year 2009/10 commenced with an improvement in Suez Canal performance. July revenues marked a strong month-on-month growth of 10 percent, up from 1.7 percent in June, wrote Alia Mamdouh of CI Capital in a memo.
The number of vessels passing through the canal in July also improved over June, rising from 1,401 to 1,521. Year-on-year, this was an 18 percent decline.
Tonnage passing through the canal was up by more than 5 million.
Improved performance for July can’t undo the harsh reality that revenue is still significantly off its performance from a year ago.
July’s posting represents a 22 percent fall from the July, 2008 haul of $490 million. The 22 percent fall, though, showed an improvement over June’s year on year decline of 26 percent.
These latest numbers give credence to the argument that the worst of the global recession is in the past. Revenue has continued a steady month-on-month recovery for much of the year.
“Revenues have been rising steadily, since registering a low of $301.8 million in February 2009, wrote Reham ElDesoki of Beltone Financial.
In a broader context, despite a decline in revenue as a result of global economic tumult, the canal registered its second highest ever annual revenue numbers for the 2008-2009 fiscal year. Earning $4.7 billion for the 12 months ending in June, the latest fiscal year came second only to the 2007-2008 fiscal year with a haul of $5.2 billion.
The largest share of the ships passing through the Suez is bound for Europe. Many analysts still fear that Europe will be among the slowest economies to recover, fueling fears that revenues from the Suez could take some time to reach their pre-recession levels.
“While we had observed February, June and September to be months when revenues usually dipped, for seasonal factors, we believe that the continued rise in traffic and tonnage, especially of non-oil vessels, reflects the gradual improvement in global trade between the East and West, wrote ElDesoki.
Analysts tend to agree that revenue will continue to improve in the 2009-2010 fiscal year, but they’re generally pessimistic that it can reach 2007-2008’s benchmark of $5.2 billion.
Beltone predicted $4.8 billion in revenue during the current fiscal year. CI Capital said it expects revenue to hit $5 billion.
The Suez Canal remains one of the government’s three primary forms of revenue, and a decline in income, therefore, has come with consequences.
First among the consequences is a nearly $100 billion budget deficit. The decline in canal revenue has contributed only marginally to this spending gap, but it has had a much more direct impact on the country’s foreign currency reserves, which have fallen 8.7 percent over the past year.
One other hopeful sign that the recovery of canal revenue may be able to outpace that of international trade is the ongoing project by the government to deepen the canal from 56 feet to 72 feet.
A lot of the larger ships, that the canal can’t accommodate, are currently made to sail around the Cape of Good Hope in South Africa. Deepening the canal would corner more of the trade passing from eastern ports in places like the Persian Gulf, India, and China to Europe and the US.