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.