The Egyptian government has structured its economy around three key revenue earners: the Suez Canal, tourism and remittances. All three depend on global economic factors and threatened to undermine the government's reform programs in 2009. There was a sense that these sectors could go into freefall since their performances depended somewhat on the performance of the global economy. These sectors have taken a hit, but their performance in recovery seems to be mixed. Suez Canal revenue has continued to tumble. As of November, revenue was still declining year-on-year, falling to $365.5 million, a 13 percent drop from last year's $419.8 million. Year-on-year measurements have their limitations, though, considering the roller coaster year and a half the global economy has faced. Month-on-month comparisons show that the Suez is in a period of unsteady recovery. November's $365.5 million in revenue represented a fall from October's $398.9 million haul. The latest numbers, though, mark a departure from the general trend exhibited by the canal this year. "The volumes are in recovery, noted Hany Genena, director of research at Pharos Holding. One of the factors which has most contributed to the canal's slow rebound has been the increase of oil prices. With oil prices cheap, sailing around South Africa's Cape of Good Hope became an economically viable alternative to the canal. As prices have increased, shipping companies can less well afford the cost of sailing the long way. "Suez Canal revenues and traffic have been recovering since February 2009, wrote Beltone Financial in a note, "when revenues registered $302 million, as non-oil traffic and tonnage rose with the gradual rebound in global trade, and oil prices rose, rendering alternative routes more expensive. The Egyptian government gave a nod to the importance of the canal in terms of the revenue it generates for the state by announcing this month that it would not increase tolls in 2010. The government has traditionally boosted toll fees each year, boosting government revenue from the canal and cementing the canal's place as major earner for the state. By holding tolls for a second straight year, though, it is clear the government is determined to maintain the flow of traffic despite continued adverse economic conditions. Egypt's tourism industry also took a hit, though it was far less dramatic than the fall in Suez Canal revenue. According to Genena, despite widespread dire predictions early in the year, tourism arrivals dropped only by 5 percent this year. "It was a drop, he said, "but it wasn't as significant as other places around the globe. Because tourists typically plan trips far ahead of time, it took some time after the onset of the economic crisis for the effects to be felt in Egypt. The country saw its first setbacks in January of this year, as potential tourists declined to make reservations. But the industry has since seen a comeback. Genena noted that the weakness of the Egyptian pound against the Euro made Egypt an attractive destination for European tourists this year. On the flip side, he said that the struggles of the global economy coupled with H1N1 fears to threaten tourism. Beltone, in a recent note, discussed the resilience of the industry. "Tourism revenues jumped to $3.2 billion in quarter one of fiscal year 2009/10, from $2.6 billion in quarter four of 2008/09, it said, "roughly unchanged from the $3.3 billion registered in quarter one of 2008/09, reflecting a rebound on a quarterly basis, and resilience on an annual basis. In the holy trinity of income generators for the state, remittances represent a third and critical source. Some suggest that stagnation in the Gulf may hurt remittances. Beltone, however, has a bullish take on remittances, which represent a critical source of foreign currency. Remittances rose to $1.8 billion in quarter one of 2009/10, from $1.78 billion in quarter four of 2008/09, according to Beltone. "We expect remittances to total $8.4 billion in fiscal year 2009/10, up from $7.6 billion in 2008/09. Of Egypt's three big sources of revenue, the Suez Canal suffered most. Its numbers held up, though, while tourism and remittances were steady.
