Egypt’s current account enters the black for the first time since 2014

Egypt generated a current account surplus for the first time since 2014 in 2Q FY 2022-2023 due primarily to falling imports, according to Enterprise calculations based on central bank figures (pdf) released Wednesday. The current account turned to a USD 1.41 bn surplus during the October-December period, compared to deficits of USD 3.8 bn in the same period a year earlier and USD 3.19 bn the previous quarter.

KEY DRIVERS OF THE IMPROVEMENT-

#1- Falling imports: Egypt’s trade deficit recorded its smallest deficit in 12 years in 2Q FY 2022-2023, narrowing to USD 6.45 bn from USD 10.64 bn a year earlier and USD 9.1 bn in 1Q. This was driven by a 20% decline in imports, which fell to USD 17.99 bn from USD 22.48 bn a year earlier, primarily due to the import restrictions imposed last year in response to the FX shortage. Meanwhile, the country exported USD 11.54 bn worth of goods during the quarter, down 3% y-o-y but up from almost USD 10 bn in the previous quarter.

#2- Tourism rebound continues:Tourism revenues rose 9% y-o-y to USD 3.25 bn, compared to USD 2.98 bn in 2Q FY 2021-2022, but fell more than a third from the previous quarter. Expect the rebound to have continued in the January-March quarter: arrivals reportedly rose 33% y-o-y during the first four months of the year, putting the government on track to meet its target of 15 mn visitors in 2023.

#3- Suez Canal revenues up:Suez Canal receipts rose 17% to USD 1.97 bn, up from USD USD 1.7 bn a year earlier. Revenues were down slightly from USD 2 bn from 1Q.

#4- Rising FDI: Foreign direct investment climbed 52% to USD 2.43 bn, from USD 1.6 bn a year earlier. Inflows fell 26% on a quarterly basis from USD 3.3 bn in 1Q.

TO THE DOWNSIDE-

#1- Portfolio outflows continue: The country clocked net portfolio outflows of USD 855.4 mn during the quarter as investors continued to pull money out of the country amid the economic uncertainty. The upside: Outflows eased markedly from USD 6 bn a year earlier during the height of the global economic shock caused by Russia’s war in Ukraine.

#2- Remittances fell: Remittances from Egyptians abroad fell 25% y-o-y to USD 5.56 bn. They also fell 14% from 1Q when they registered USD 6.44 bn.

The story received international coverage:Reuters.