Back to the complete issue
Sunday, 7 August 2022

Outflows, commodity price shock hit current account in 3Q 2021-2022

Egypt’s current account deficit widened more than 2% to USD 5.79 bn in 3Q 2021-2022, as capital outflows and surging commodity prices put pressure on the country’s external position, according to central bank figures (pdf) released Thursday showed. An exodus of foreign investors fuelled by the war in Ukraine and rising interest rates resulted in a net USD 14.75 bn exiting the country between January and March, reversing inflows of USD 5.82 bn a year earlier, the data showed. “This reflected investors’ concerns over the Russian-Ukraine conflict that could escalate into World War III, as well as the contractionary monetary policies adopted by the Federal Reserve, leading to outflows of hot money from emerging markets,” the central bank said.

The commodity price shock dealt a blow: Egypt’s non-oil trade deficit widened to USD 13.90 bn from USD 11.60 bn in 3Q 2020-2021 after a combination of surging food and energy prices triggered by the war and covid-fuelled inflation caused a 21% rise in its non-oil import bill, the central bank said. This led to the overall trade deficit widening to USD 11.83 bn from USD 11.37 bn a year earlier.

A lot can change in three months: The deficit jumped more than 52% from USD 3.80 bn in the previous quarter.

The bright spots: Rising exports + FDI limited the damage. Rising commodity prices benefited the country’s oil and gas sector in the third quarter, which saw exports more than double to USD 5.15 bn from a year earlier. Meanwhile, non-oil exports rose 25% to USD 6.63 bn, from USD 5.31 bn. Net foreign direct investment was significantly up in the three months ending March 2022, reaching USD 4.08 bn from USD 1.43 bn a year earlier, and from USD 1.6 bn in 2Q 2021-2022.

Also from the release:

  • Tourism receipts were up 80% y-o-y to USD 2.38 bn but fell 21% on a quarter-on-quarter basis. The sector was negatively affected by the war due to the absence of Ukrainian and Russian tourists, the central bank said.
  • Suez Canal revenues rose 18% y-o-y to USD 1.7 bn, and remained stable on a quarter-on-quarter basis.
  • Remittances from Egyptian expats increased slightly to USD 8.05 bn from USD 7.85 bn a year earlier. Flows were up by around 9% from the previous quarter.

The figures got the attention of the foreign press: Reuters | Bloomberg.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.