The Central Bank of Egypt (CBE) reported that the transactions of the Egyptian economy with the rest of the world resulted in an overall BOP surplus of $228.8m in the first quarter (July/September 2023) of FY 2023/2024. This was lower than the surplus of $523.5m in the same period a year earlier, as the current account deficit improved by 12.1% to $2.8bn (from $3.2bn).
This was mainly due to the decrease in the trade deficit by 12.7% to $7.9bn, and the increase in services surplus to $5.2bn, driven by the rise in both the Suez Canal transit receipts and tourism revenues.
The capital and financial account also recorded a net inflow of $1.8bn, with foreign direct investment in Egypt registering a net inflow of $2.3bn, while portfolio investments in Egypt continued to have a net outflow of $523.4m.
The following factors contributed to the decline in the current account deficit:
- Non-oil trade deficit improved by $2.4bn, reaching $6.6bn (from $9.0bn), mainly reflecting the decrease in non-oil merchandise imports by $1.9bn, as shown below:
- Non-oil merchandise imports dropped by 12.5% to $13.3bn (from $15.3bn). The drop was mainly in corn, propylene polymers, and organic and inorganic compounds.
- Non-oil merchandise exports increased by $458.9m, to $6.7bn (from $6.3bn), reflecting mainly higher exports of wires and cables, fresh, frozen, or cooked vegetables, gold, and electrical household appliances.
- Transport receipts increased by 13.5% to $3.5bn (from $3.0bn), as a main result of the increase in the Suez Canal transit receipts by 19.4% to $2.4bn (from $2.0bn), driven by the rise in both the net tonnage of vessels by 8.2% to 403.1m tons and the number of passing vessels by 4.3%.
- Tourism revenues rose by 9.3% to $4.5bn (from $4.1bn), due to the rise in both tourist nights by 9.3% to 47.7m, and tourist arrivals to Egypt by 23.2% to 4.2m.
The factors that limited the improvement of the current account were:
- The deficit of oil trade balance widened by $1.2bn to $1.3bn (from $106.0m), primarily due to the decline in oil exports, as shown below:
- Oil exports went down by $2.1bn to $1.6bn, on the back of the decrease in the exports of natural gas by $2.0bn and oil products by $393.8m (due to the decline in the exported quantities and the global prices).
- Meanwhile, the exports of crude oil increased by $299.6m (owing to the rise in the exported quantities).
- Oil imports decreased by $891.1m to $2.9bn because of the decrease in imports of both crude oils by $937m (on the back of the drop in the imported quantities and the global prices) and oil products by $96.1m (due to the decline in the prices despite the rise in the imported quantities).
- Meanwhile, natural gas imports increased by $142m (owing to the rise in the imported quantities).
- Egyptian workers’ remittances decreased by 29.9% to $4.5bn (from $6.4bn).
- Investment income deficit slightly increased by 1.1% to $4.6bn (from $4.5bn), as investment income payments went up by $187.2m to $5.0bn (from $4.8bn).
This was despite the improvement of investment income receipts by $137.2m to $413m (from $275.8m), mainly due to the higher interest on residents’ deposits at banks abroad.
The capital and financial account showed a net inflow of $1.8bn in the reporting period (compared to $4.4bn in the same period last year), due to the following developments:
- FDI in Egypt had a net inflow of $2.3bn (compared to $3.3bn), as follows:
- FDI in non-oil sectors had a net inflow of $2.6bn (compared to $3.6bn), as net proceeds from selling local entities to non-residents were $15.4m (compared to $1.0bn) and net reinvested earnings were $1.1bn (compared to $1.4bn).
- Net investment inflows for real estate purchases by non-residents were $312.5m (compared to $165.0m); net inflows for greenfield investments or capital increases of existing companies were $993.3m (compared to $975.3m); and intercompany loans had a net disbursement of $108.5m (compared to a net repayment of $15.0m).
- FDI inflows in the oil sector remained at $1.4bn (representing new investments of foreign oil companies).
- The outflows (representing the cost recovery for exploration, development, and operations previously incurred by foreign partners) slightly decreased to $1.6bn from $1.7bn, so the net outflows improved to $247.8m (compared to $320.5m).
- Net outflow of portfolio investment in Egypt dropped to $523.4m (compared to $2.2bn).
- The change in banks’ foreign assets had a net outflow of $731.0m, i.e. an increase in the assets, compared to a net inflow of $690.5m.
- The change in banks’ liabilities had a net outflow of $187.2m, i.e. a decrease in the liabilities, compared to a net inflow of $1.7bn.
- The change in the CBE’s liabilities had a net inflow of $2.0bn (compared to $652.4m).
