Current account surplus in 4Q as imports fall, tourism revenues rise

Egypt generated a current account surplus in 4Q 2022-23 on the back of falling imports and rising tourism and Suez Canal revenues, according to Enterprise calculations of central bank figures (pdf) released last week. The current account turned to a USD 560 mn surplus during the April-June quarter, compared to a USD 3.0 bn deficit in 4Q 2021-22 and a USD 3.5 bn deficit in the previous quarter.

For the year: The current account deficit for the entire fiscal year narrowed more than 70% to USD 4.7 bn from USD 16.6 bn in FY 2021-22 aided by the import squeeze and record tourism and Suez Canal revenues.

Surpluses are still a bit of a rarity for us: This year’s Q4 current account figures are only the second time we’ve achieved a quarterly surplus since 2014. The other instance was in 2Q of this year when we managed to achieve a USD 1.4 bn surplus.

Here’s what happened:

#1- Imports continued to decline: Imports declined for the fifth consecutive quarter to hit their lowest level since the covid-19 pandemic in 2020 as the FX shortage continued to make life difficult for importers. Imports fell 25% to USD 16.2 bn from USD 21.3 bn in 4Q 2021-22, primarily due to the non-oil sector. This resulted in the trade deficit narrowing to USD 7.6 bn from USD 9.9 bn a year ago.

#2- The tourism boom: Tourism revenues rose more than 30% y-o-y to USD 3.3 bn in 4Q. Across the year, tourism revenues jumped 27% to hit a record USD 13.6 bn, up from USD 10.7 bn in the fiscal year prior.

#3- Suez Canal receipts contributed: Suez Canal revenues rose by a third y-o-y to USD 2.5 bn during the quarter. For the year, the canal’s revenues jumped 25% to hit a record USD 8.8 bn from USD 7.0 bn t5he year before.

On a less positive note:

• Despite gov’t efforts , FDI continued to fall: Foreign direct investment recorded its lowest quarterly figure this year, falling to USD 2.1 bn from USD 2.2 bn in 3Q. Nevertheless, the quarterly figure was more than 30% higher than 4Q 2021-22.
• Exports slump: Exports weakened to USD 8.6 bn from USD 11.4 bn a year earlier and USD 9.6 bn the previous quarter. The decline was driven by a fall in oil and gas exports, while non-oil exports were largely flat at USD 6.5 bn.
• Remittances declined again: Remittances hit their lowest level since FY 2016-17 amid the continued currency uncertainty. Some USD 4.6 bn was sent home from Egyptian expats during 4Q, down from USD 8.3 bn a year earlier.
• Portfolio flows: Investors continued to pull capital from financial assets, though the rate of outflows slowed to its lowest level this year. Egypt recorded USD 303.3 mn of portfolio outflows during the quarter compared to USD 3.7 bn of outflows in the same quarter last year.