Suez Canal expansion to have limited effects: Moody’s

CAIRO 

Credit ratings provider Moody’s on Thursday expected “limited credit-positive effects” for Egypt in the current fiscal year from a major expansion of the Suez Canal.

“Suez Canal receipts would grow at a much slower pace, thereby limiting the positive effects on Egypt’s external payments position,” Moody’s said in a statement. “We therefore think that the country’s external current account balance will not swing quickly to a surplus, but instead will post a deficit of around 3 percent of GDP in fiscal 2016.”

Last week, Egyptian President Abdel-Fattah al-Sisi launched a 35-km (22-mile) shipping route of the Suez Canal.

The Egyptian government says that the $8-billion project will double the country’s Suez Canal earnings from the current $5.3 billion per year to some $13 billion annually.

“The degree of support [for Egypt's credit quality] will depend on an acceleration in global trade growth, which seems unlikely to materialize quickly,” Moody’s said.

A graph in the statement expects that with historical average growth, revenues of the vital waterway will register at just below $5.6 billion in 2023.

According to the credit ratings provider, for revenues to reach the projected $13 billion, Egypt would need a 10 percent increase in world trade growth.

A vital source of foreign currency for Egypt, the Suez Canal is one of the world's busiest waterways. It connects the Mediterranean and Red seas, allowing ships to travel between Europe and South Asia without navigating around Africa.