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Wednesday, 30 June 2021

Egypt’s current account deficit doubles in 3Q2020-2021

Egypt’s current account deficit more than doubled to USD 5.7 bn in 3Q2020-2021, from USD 2.8 bn in the same period last year, according to our math based on central bank figures (pdf) released last night. On a quarterly basis the deficit widened almost 20% from USD 4.8 bn in 2Q2020-2021.

Keep in mind as you read: The state’s third quarter covers the period January through March. So in 3Q2019-2020, we had just over two months of “normal” economic activity before tourism (and plenty more) fell off the cliff with the onset of the pandemic.

Trade deficit widens, despite rising exports: Egypt’s trade deficit widened by 20% in 3Q2020-2021 compared to the same period the previous year, despite non-oil exports rising 20% to USD 5.3 bn. The deficit ended the quarter at USD 11.4 bn compared to USD 9.3 bn last year.

This was driven primarily by a jump in non-oil imports: Egypt spent USD 16.9 bn on non-oil imports during the three-month period, up 23% from USD 13.7 bn last year. This resulted in the non-oil trade deficit widening by almost 25% to USD 11.6 bn.

Tourism revenues were much lower compared to 3Q2019-2020: The comparative quarter had two full months of normal activity before the government suspended international flights towards the end of March 2020. That ensured tourism revenues were higher last year, as Egypt received USD 1.3 bn in revenues in 3Q2020-2021, down more than 40% from USD 2.3 bn in the same period last year.

But there were signs of recovery on a quarter-on-quarter basis: Revenues in 3Q rose 32% from the USD 987 mn that flowed into the tourism sector in 2Q.

Remittances were basically flat in 3Q: Remittances from foreign workers — another vital source of hard currency for Egypt — fell by a marginal 0.2% from USD 7.87 bn in 3Q2019-2020.

As were Suez Canal revenues, which increased marginally y-o-y to USD 1.45 bn.

Things are looking much better on the capital account side of things: Egypt received USD 1.4 bn of foreign direct investment during 3Q, up 47% from just USD 970 mn in the same period last year. Net inflows of portfolio investment rose to USD 5.8 bn during the quarter. This compares to the same period last year, which saw USD 8.2 bn of net portfolio outflows. 3Q2019-2020 coincided with the beginning of the global market crash and the emerging-market sell-off that occurred in March through May in response to the pandemic.

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