Current account deficit narrows in 3Q 2022-23

Egypt’s current account deficit narrowed by 40% y-o-y to USD 3.5 bn in 3Q 2022-2023 on the back of falling imports, according to Enterprise calculations of central bank figures (pdf) released yesterday. The deficit came in at USD 3.5 bn during the January-March quarter, down from USD 5.8 bn in the same period last year and compared to a USD 1.4 bn surplus in 2Q, the country’s first since 2014. On a nine-month basis, the current deficit narrowed more than 60% to USD 5.3 bn from USD 13.6 bn last year.

Thank the import squeeze: The value of imports fell 25% y-o-y during 3Q, helping to narrow the trade deficit despite a decline in exports. The country spent USD 17.5 bn on imports during the three-month period, down from USD 23.6 bn in the same period last year, as the ongoing shortage of hard currency constrained importers’ ability to pay for overseas goods. This caused the trade deficit to narrow more than 30% to USD 8.1 bn, offsetting an 18% fall in exports, which came in at USD 9.6 bn.

It’s likely that falling oil and gas sales helped depress exports: Oil and gas exports fell almost 40% y-o-y to USD 3.2 bn during the quarter. Non-oil exports declined at a slower rate, bringing in USD 6.4 bn compared to USD 6.6 bn in the same period last year.

Tourism and Suez Canal revenues also rose: Tourism revenues rose 25% y-o-y to USD 3 bn during the quarter from USD 2.4 bn last year, which the central bank attributed to a “rise in the numbers of both tourist nights and tourist arrivals.” Meanwhile, Suez Canal revenues saw a 29% increase to USD 2.2 bn from USD 1.7 bn a year prior thanks to an increase in the net tonnage of vessels passing by.

On a less positive note- FDI and remittances also fell during the quarter, and there were further portfolio outflows:

• FDI: Net foreign direct investment almost halved y-o-y, falling to USD 2.2 bn from USD 4.1 bn.
• Remittances: Incoming transfers from Egyptian expats fell more than 30% y-o-y to USD 5.5 bn.
• Portfolio flows: Investors pulled USD 400 mn from the country during the three-month period, down from USD 14.8 bn a year earlier.