Egypt’s current account deficit grew by 27.2 percent in the first quarter (1Q) of FY 2020/2021 to record $2.8 billion, up from $3.8 billion registered in the preceding quarter (April/June 2020).

Compared with the corresponding quarter of FY 2019/2020, the Central Bank of Egypt (CBE) said that the current account deficit has doubled, jumping from $1.4 billion.

The CBE attributed this “temporary increase” in the deficit to the drop in services surplus by 78.3 percent to register $876.3 million, down from $4 billion, owing to the decline in tourism revenues that recorded $801 million, down from $4.2 billion in the 1Q of FY 2019/20, and the contraction in transport receipts by $524.5 million.

The increase in the current account deficit was also driven by the rise in the non-oil trade deficit by $526 million to reach $8.7 billion, up from $8.2 billion in 1Q of FY 2019/20 due to higher imports of all non-oil merchandise groups (except for raw materials) by 4.1 percent to register $13.4 billion, up from $12.9 billion in 1Q of FY 2019/20, according to the CBE.

The CBE listed the positive factors that contributed to lifting the aggravation of the current account deficit.

These included the increase in workers’ remittances by 19.6 percent to record $8 billion, up from $6.7 billion in the 1Q of FY 2019/20.

They also included the oil trade balance surplus of $143.7 million (from a deficit of $ 606.2 million), as oil import payments declined almost by half, registering $1.5 billion on the back of the decline in imports of all oil products by 52.8 percent. This was due to the decrease in the quantities imported as well as the contraction in crude oil imports by 28.7 percent, triggered by the slump in world oil prices, despite the rise in the quantities imported, said the CBE.

Egypt’s overall balance of payments registered a deficit of $69.2 million in 1Q of FY 2020/2021, compared to a deficit of $3.5 billion in the preceding quarter (April/June 2020), and a surplus of $227 million recorded between July and September 2019, according to the CBE.

The CBE said that Egypt's external transactions demonstrated its resilience and ability to weather the shock caused by the COVID-19 pandemic.

Egypt’s net inflows channelled into capital and financial accounts rose in the 1Q of FY 2020/21 to $ 3.9 billion, up from $1.3 billion in the 4Q of 2019/20, and $657.9 million in the 1Q of FY 2019/20.

The CBE said that the increase reflects the marked improvement in foreign portfolio investment in Egypt due to the easing in global financial conditions and the increased confidence of foreign investors in the Egyptian economy despite the global uncertainty caused by the COVID-19 pandemic.

On the other hand, foreign direct investment inflows to Egypt contracted by 31.8 percent to record $1.6 billion, down from $2.4 billion in 1Q of FY 2019/20.

The CBE attributed the contraction to the shift in net investments in the oil and gas sector to a net outflow of $75.3 million, down from a net inflow of $744.2 million, and the decline of $55.6 million in net investments in non-oil sectors.