Rising remittances curb current account deficit in 3Q2019-2020

Rising remittances curb current account deficit in 3Q2019-2020: A rise in foreign remittances helped Egypt’s current account shrug off the effects of the covid-19 pandemic during 3Q FY2019-2020, narrowing the deficit markedly to USD 2.8 bn from USD 4.5 bn a year earlier, according to official data (pdf) released by the Central Bank of Egypt yesterday. Remittances, a key source of hard currency for the country, increased by USD 1.7 bn to USD 7.9 bn during 3Q2019-2020 despite the global headwinds in March. This helped the current account deficit for the first nine months of the fiscal year shrink to USD 7.3 bn, compared to USD 9.8 bn a year earlier.

Non-oil trade deficit falls: The non-oil trade deficit fell by USD 2.2 bn to USD 27.3 bn during the first three quarters of FY2019-2020, from USD 29.5 bn in the same period a year earlier. A key contributor was merchandise exports such as gold, radio and TV transmitters and pharma products, which rose by USD 1.2 bn to USD 13.6 bn. Imports of iron, coal, spare parts for cars, and pharma products dropped, contributing to the reduced deficit. In 3Q, non-oil merchandise exports rose almost USD 300 mn to USD 4.4 bn while imports fell 3.2% to USD 13.7 bn.

But oil exports continued to decline: The oil trade deficit widened to USD 773.3 mn in 9M2019-2020 (from a USD 294.3 mn deficit last year), driven by a decline in oil exports, which fell by USD 1.2 bn to USD 7.3 bn. The deficit would have been wider had it not been for the slump in oil prices in 3Q, which caused a 21.3% decline in oil imports to USD 2.3 bn during the three-month period.

Foreign direct investment inflows more than halved during 3Q to USD 970.5 mn from USD 2.3 bn in 3Q2018-2019, amid heightened uncertainty because of the pandemic.

Tourism revenues decline in 3Q: Tourism revenues, another key source of currency, came under pressure during the third quarter, falling 11.4% to USD 2.3 bn (against USD 2.6 bn the year before) as the government suspended international flights towards the end of March. The overall travel balance fell to USD 1.5 bn from USD 1.9 bn, exacerbated by an 11.4% rise in travel payments.

Other key metrics:

• Suez Canal receipts rose by USD 84.4 mn to USD 1.4 bn in the third quarter.
• Portfolio investments recorded net outflows of USD 8.2 bn in 3Q, compared to net inflows of USD 6.9 bn.