Egypt merchandise Q1 deficit grew $1.9 billion in March

March saw a better than expected rebound in production activity, raising the possibility of a trade balance lifting pressure from Egypt's widening current account deficit

Egypt's total merchandise export growth stabilised at 16.6 per cent year-on-year (y-on-y) in March 2011, while imports growth recovered to reach 3.4 per cent y-o-y, widening Egypt's trade deficit to US$1.9 billion in March 2011, according to data on Egypt's monthly trade balance from CAPMAS.
In March, merchandise exports reached $2.7 billion in March 2011, after recording $2.3 billion in February 2011, growing by 20 per cent month-on-month (m-o-m).
"We expected to see export growth decelerate in March 2011, as production was mostly halted in February 2011, in addition to our expectation of March 2011 witnessing weaker production activity," says a statement by investment bank Belone Financial. "However, exports still increased on monthly and annual bases, reflecting a better-than-expected rebound in production activity in March 2011."
Exports in March 2010 reached $2.3 billion, leading to an annual growth rate of 16.6 per cent in March 2011, very close to February 2011 growth of 16 per cent.
Beltone previously estimated that exports would contract by around 17.5 per cent y-o-y and imports to contract by 8 per cent y-o-y in the 2010-11 financial year, on the back of the slowdown in domestic demand, particularly private consumption and investment. However, the figures released beat their estimates of a significant contraction.
According to CAPMAS, merchandise imports began to rebound in March 2011, increasing by 3.4 per cent y-o-y to reach $4.6 billion and increased by 40 per cent m-o-m, after contracting by a record 29.8 per cent m-o-m in February 2011.
"We expected imports to continue to record weaker annual and monthly growth rates, on account of tamed private consumption and investments," Beltone's statement read."However, imports seem to have rebounded faster than expected, growing by a significant 40 per cent m-o-m and increasing by 3.4 per cent y-o-y."
The better-than-expected performance of exports and imports in 1Q2011 could, according to Beltone, partly be attributed to the rise in export and import value, and could also signal more resiliencies in private consumption and domestic production.
The investment bank predicted that, If exports continue to grow at a faster pace than imports, Egypt's may achieve a trade balance in FY2010-11, lifting some pressures off its widening current account deficit.