Egypt's current account deficit narrows, FDI up in July-September 2019

[CAIRO] Egypt's current account deficit narrowed to US$1.382 billion in July to September 2019 from US$2.012 billion in the same period a year earlier, central bank data showed on Wednesday.

Net foreign direct investment (FDI) inflows during the period, which is the first quarter of Egypt's 2019/2020 financial year, rose to US$2.353 billion from US$1.415 billion a year earlier.

Barring its oil sector, Egypt had been struggling to attract FDI for years. Its non-oil FDI hit its lowest since 2014 in the third quarter of the 2018/2019 fiscal year.

"FDI is almost double quarter-on-quarter and up 67 per cent year-on-year," said Allen Sandeep, head of research at Naeem Brokerage.

The jump was "led by higher non-oil investments ... a long awaited development, which is also a key performance indicator post-implementation of the tough economic reforms."

Since November 2016, Egypt has devalued the pound by about half, hiked fuel prices several times and introduced a value-added tax in reforms tied to a three-year US$12 billion loan from the International Monetary Fund (IMF).

Travel revenues rose to US$4.194 billion in the quarter from US$3.931 billon a year earlier, indicating the tourism industry, a major source of foreign currency, remains robust.

"Tourism receipts are up significantly both quarter-on-quarter and year-on-year," said Sandeep. "Looks like it's going to be another record year if it continues this way."

The trade deficit narrowed to US$8.783 billion from US$9.813 billion. The non-oil trade deficit also narrowed to US$8.177 billion in the quarter from US$9.207 billion a year before.

"Non-oil exports are up by more than 17 per cent, which is very good," Mr Sandeep said, adding that more exports and declining imports led to the improvement.

"Indirectly, this partly also explains the reason for the EGP appreciation during the period," he said. The Egyptian pound has strengthened more than 10 per cent against the dollar in 2019.

Receipts from the Suez Canal, another important source of hard currency for Egypt, increased slightly to US$1.507 billion from US$1.441 billion a year before, the central bank data showed.

Remittances from Egyptian workers abroad rose to US$6.713 billion from US$5.909 billion a year before. Foreign portfolio investments recorded an outflow of US$1.982 billion, down from an outflow of US$3.240 billion a year prior.

REUTERS