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Tuesday, 26 May 2020

Egypt: Imports shrink on the back of the outbreak of the Covid-19

Safeya Mounir , Thursday 23 Apr 2020
Imports shrink
Egypt’s non-oil imports are down by 24 per cent (photo: Reuters)
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Egypt’s non-petroleum imports declined by 24 per cent in the first quarter of 2020 compared to the same period last year to $13.81 billion, according to Minister of Trade and Industry Nevine Gamea, citing figures from a report issued by the General Organisation for Export and Import Control.

“Prolonged lockdown periods and depressed international trade activity could result in significant import savings. That said, we believe the trade balance deficit could narrow to $31.5 billion in fiscal year 2019-20 from our previous estimate of $35.8 billion,” noted HC Securities, an investment bank, in a report issued on 11 April.

Ashraf Sheeha, a member of the Importers Division at the Federation of the Chambers of Commerce, said that about 25 per cent of Egypt’s imports come from China, which has been adversely affected by the coronavirus outbreak, leading to the closure of factories and the suspension of exports.

European exporters like Spain, Italy, and Germany have also cut down or halted production due to the outbreak of the virus.

China typically holds trade shows in April and October that help to stimulate Chinese exports. The April show was cancelled owing to the coronavirus and will instead be held online in June, Sheeha said, who expected it to make up for lost months during which imports from China had come to a halt.

Recently released data from the World Trade Organisation suggest international trade will decrease by between 13 and 32 per cent this year due to the spread of the coronavirus.

Once imports pick up again, demand for Chinese exports will increase, particularly because 90 per cent of imports from China are for industrial raw materials, including pharmaceutical raw materials and materials needed for food production, Sheeha said.

He said that 80 per cent of Egypt’s imports of household and electronic spare parts come from China. Egyptian factories are at present working with materials they have in storage and problems will arise should they run out of stockpiled materials, he said.

Egypt banned the import of some Chinese products in February, including onions, fearing the spread of the Covid-19 virus. Egypt’s imports rose last year by 20.8 per cent to $71.9 billion, up from $59.5 billion in 2018.

The country’s non-petroleum trade deficit dropped by $1.4 billion to $18 billion in the first half of the fiscal year 2019-20, down from $19.4 billion during the same period the year before. This was the result of a rise in non-petroleum exports by $940.9 million to $9.2 billion, up from $8.3 billion a year earlier.

According to balance of payments data, Egypt increased its imports of gold, radio and television sets, medicines and medical items, and inorganic and organic compounds. The country’s imports of non-petroleum products retreated by $490.7 million this fiscal year to $27.2 billion, down from $27.7 billion during the same period a year earlier. These products include cast iron, wheat, spare parts for vehicles, and medicines.

Alia Mamdouh, a senior economist with Beltone Financial, an investment bank, said Egypt’s imports would shrink this year, particularly with the decrease in petroleum prices, which make up about 20 per cent of the country’s imports.

Due to decreasing demand in the wake of the coronavirus pandemic, the price of a barrel of oil has dropped from $60 to $20 or less. This has led OPEC to reduce production to put the brakes on declining prices.

This will limit the opportunity to import intermediary commodities, restricting imports on raw materials, Mamdouh said. She expected a decline in the imports of many finished goods, including vehicles, furniture, and clothing, with spending being restricted to basic items.

*A version of this article appears in print in the  23 April, 2020 edition of Al-Ahram Weekly under headline: Imports shrink


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