x Abu Dhabi, UAESaturday 20 January 2018

Suez Canal trade drains Egypt

The Suez Canal, Egypt's major shipping thoroughfare, registers a dip in trade during February, with worrisome repercussions for the country's economy.

The bustling waterways of Egypt's major shipping thoroughfare, the Suez Canal, are where movements in global trade often create their first ripples.

The latest signs show the numbers of trading vessels passing through the canal steadily trickling away.

Figures from the Suez Canal Authority showed a 1.8 per cent dip in traffic last month. Traffic has declined during eight months out of the last 12.

Revenues slipped 1 per cent to US$381.4 million (Dh1.4 billion) during last month, compared with the corresponding period last year.

The biggest dip was in container shipping, which fell by 10.9 per cent to 491 vessels during the same period, with tonnage falling by 2.8 per cent, compared with February last year.

Numbers of passenger ships fell from four to one last month. The cruise industry has been rocked by increased pirate attacks in the Gulf of Aden and the grounding of the Costa Concordia this year.

The decline in trading was the most worrisome aspect and most likely reflected a slowdown in Europe, said Jarmo Kotilaine, the chief economist at Saudi Arabia's National Commercial Bank.

"The numbers of passenger ships aren't a surprise since we've seen a pretty consistent picture from hotel occupancy and other indicators," he said.

"But it looks like the forward-looking indicators for the global economy aren't that great."

The Suez Canal is also one of Egypt's major sources of revenue and access points to foreign currency reserves.

The state of Egypt's foreign reserves has been carefully watched by investors as the country struggles to avert a balance of payments crisis.

Net international reserves stood at $15.7bn at the end of last month, a decline of 3.8 per cent from the previous month.

Egypt turned down a loan from the IMF last year but has since invited the agency to return, with talks about a $3.2bn facility due to be revived this month.

A default could cause investors to pull money from the country, exacerbating an inflation rate that was running at 9.9 per cent last month.

Food prices, which were among the factors sending Egyptians on to the streets of Cairo to topple the former president Hosni Mubarak last year, had risen 12.8 per cent by last month from a year earlier, the data shows.

Inflation in rural areas ran even higher than in Egypt's cities.