UPDATE 2-Egypt current account deficit widens, tourism picks up, FDI falls
(Adds detail, background, anaylsts’ comments)
By Yousef Saba
CAIRO, April 1 (Reuters) – Egypt’s current account deficit widened to $2.1 billion in the last three months of 2018 from a deficit of $1.78 billion in the same period a year previously, according to Reuters calculations based on central bank data released on Monday.
Tourism improved in Egypt. Travel revenues rose to $2.86 billion in the quarter from $2.28 billion in the same quarter last year, Reuters calculations showed.
Foreign portfolio investments recorded an outflow of $2.65 billion in the quarter versus an inflow of $540.7 million in the same quarter the year prior.
“Overall, the balance of payments in the second quarter of fiscal year 2018/19 is negative because we achieved a deficit for the first time since fiscal year 2015/16, mainly pulled down by negative net portfolio investments due to the turbulence in emergent economies,” said Yara Elkahky, an economist at Naeem Brokerage.
Egypt’s net foreign direct investments declined in the same period to $1.74 billion from $1.9 billion a year earlier, Reuters calculations showed.
Petroleum exports rose to $3.2 billion in the quarter from $2.03 billion in the same quarter a year earlier. Petroleum imports declined to $2.36 billion from $3.23 billion year-on-year. Egypt became a net exporter of natural gas in late 2018.
The central bank had previously separated petroleum investments but did not do so in the report released on Monday.
The trade deficit narrowed to $9.36 billion in the quarter from $9.84 billion in the second quarter of the 2017/2018 financial year.
“The petroleum trade balance will continue to improve on the back of gas exports,” said Radwa El-Swaify, head of research at Pharos Securities Brokerage. “The non-petroleum trade deficit should stabilise pending an improvement in exports.”
Suez Canal revenues edged up to $1.49 billion in the quarter from $1.39 billion year-on-year.
Expatriate remittances fell to $6.14 billion in the quarter from $7.1 billion year-on-year.
The overall balance of payments registered a deficit of $2.06 billion during the quarter, the second quarter of the fiscal year beginning in July. It registered a surplus of $515.2 million in the same period last year.
“Hopefully, tourism will continue to outperform,” El-Swaify said. “And foreign portfolio investments have actually reversed their trend, so this is an item that will change going forward.”
Egypt’s economy has struggled to lure back foreign investors and tourists since a 2011 uprising drove them away. In late 2016, it signed a $12 billion deal with the International Monetary Fund in to boost growth.
As part of the plan, the government imposed economic reforms that have strained the budgets of millions of Egyptians, among them devaluing the currency, cutting energy subsidies and introducing a value-added tax. (Reporting by Yousef Saba; Editing by Larry King)
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