CAIRO: While Egypt's main revenue earners were vulnerable to external and internal shocks throughout 2010 — particularly in the tourism industry and in Suez Canal receipts — their effects were unable to hamper increased revenues from these sources. Along with workers' remittances, the economy's main revenue earners performed better in 2010 compared to the prior year. Meanwhile, the outlook for 2011 — according to analysts — is positive, and will likely see a takeoff to pre-crisis levels. Magda Kandil, director of the Egyptian Center for Economic Studies, said that the rebound in foreign receipts in 2010 is tied to a relative improvement in the global economy. Yet Egypt's closest economic linkages lie within regions still reeling from post-crisis woes. External shocks to revenues included a series of debt troubles in Europe, starting in March 2010 when Greece unveiled a sweeping austerity package and culminating in last month's Irish debt crisis, which required a combined bailout from the International Monetary Fund and the European Union. Tourism and Suez Canal revenues were the most vulnerable to this turbulence, but still gained enough traction to close off the year on a high note. Along with the ongoing recession that has hit key tourism source markets in the euro zone, several unusual incidents affected Egypt's tourism sector indirectly. April saw a disruption in air traffic caused by the volcanic ash cloud from Iceland, and December shark attacks in Sharm El-Sheikh — one of Egypt's prime diving destinations — caused more waves. Traffic through the Suez Canal faltered early in the year, negatively impacted by a weaker global economy and reduced demand for products in advanced markets due to lower consumer confidence and household incomes. Piracy in the Gulf of Aden also resulted in large numbers of shipping companies opting for longer alternative sea routes that circumvent the Suez Canal entirely. In light of all these developments, the country's income expectations were lowered for both tourism and canal receipts. However, as the year progressed, gloomy forecasts made room for positive projections. Omayma El-Husseini, spokesperson for the Ministry of Tourism, said that 2010 saw a “10.5 percent increase in tourism revenues from the previous year.” According to Business Monitor International (BMI), “following a relatively modest decline in foreign tourist arrivals in 2009 of 2.3 percent year-on-year — an estimated 12.4 million people — the Egyptian tourism sector recorded a strong rebound in arrivals in 2010.” The ministry said that the numbers of tourists increased by 21 percent in the first half of 2010 to over 7 million visitors, with overall tourism revenue up by nearly 18 percent to $5.6 billion. BMI revised its growth forecast for the first quarter of 2011 to a 14 percent year-on-year increase, citing “a recovery in tourism in the fourth quarter of 2009, and strong growth in 2010.” BMI also expects growth to be favorable in 2011 as economies in key source markets begin to recover, driving total tourism revenues to $12.8 billion in fiscal year 2010/11. Investment firm CI Capital, in its end of year report, credits the 2010 increase in tourism revenues to the ministry's initiatives. Some of the ministry's decisions that CI Capital praises include its advertising campaign entitled “Egypt: Where it all begins,” a number of joint marketing campaigns with international tour operators, its expansion of the number of low-cost carrier airlines within various airports, and its improvement in the quality of services that are offered to tourists. El-Husseini attributed these governmental measures as the reason why the sector was doing so well. “This year we are expecting the number of tourists to amount to around 13.5 million,” El-Husseini said. “Next year, we are hoping to attract 17 million tourists.” Commenting on the most recent developments in the sector, Kandil said that the recent shark attacks have not significantly dampened tourism revenues. As for the Suez Canal, Egypt in July posted the highest monthly revenue since the global financial crisis in late 2008, totaling $406.2 million. Canal revenues reached $2.1 billion in the last five months of 2010, increasing 10 percent year-on-year. CI Capital stated that it expects canal receipts to add up to $4.9 billion in fiscal year 2010/11, a figure below the pre-crisis level of $5.2 billion. Despite the lower projected income from the Suez Canal, it is still a positive sign for the country's future “given that global downside risks remain elevated and economic recovery in advanced economies is expected to remain fragile.” BMI also predicted a growth in Suez Canal receipts, but added that the piracy problem in the Gulf of Aden must first be contained. For remittances, CI Capital expects the recovery in oil prices — averaging $75.2 per barrel in 2010, up from $69.7 per barrel a year earlier — to boost Gulf Cooperation Council (GCC) economies. Given that the GCC member countries constitute half of Egypt's remittance inflows, transfers are projected to reach up to $11.5 billion for the current fiscal year as a result of the oil price increase. “Remittances have risen 25 percent in fiscal year 2009/10 from the 9 percent decline seen a year earlier,” CI Capital stated in its report. “Consequently, transfers increased to $10.5 billion. Firm oil prices at an average of $84 per barrel in fiscal year 2010/11 should bode well for remittances.” “The expectations are that improvements will continue, assuming the debt problem is contained in Europe and quantitative easing and fiscal stimulus prove to be effective in the US,” Kandil concluded.
