Beltone Financial said the foreign direct investments (FDIs) in Egypt increased to $2.4bn in the first quarter (1Q) of FY 2019/20 from $1.4bn in the same period of FY19, the highest since 2017, driven by $0.84bn increase in net inflows for Greenfield investments to $1.5bn. In addition, a $0.2bn rise in net inflows of oil sector investments to $0.7bn. On the other hand, portfolio investment outflows eased to around $2bn from $3.2bn in 1Q19. This comes despite the rise in net disbursements of medium and long-term loans and facilitate to $2.3bn from $0.2bn last year. All this contributed to a slightly narrower balance of payment surplus of $227m from $284m. Egypt's trade deficit narrowed by $1bn to $8.8bn during 1Q20, primarily driven by growth in non-oil exports by 18%, recording $707m year-over-year (y-o-y). The exports of goods grew by 5% y-o-y to record $ 7.1bn, despite the drop of oil exports by $372m on a lower average oil price of $62/bbl from $76/bbl in 1Q19. This was mitigated lower oil imports by 11%, thanks to the success of the country's recent natural gas explorations, which supported a maintained net oil balance deficit at $0.6bn. Meanwhile, non-oil imports dropped by 2.4% y-o-y continued the trend that started in 4Q19, providing further support to the trade deficit. Beltone analyst believe this is a reflection of both a stronger currency and lower private spending levels as well as muted private investment growth. Moreover, Egypt's tourism revenue has continued to recover, adding $0.3bn y-o-y and $1bn q-o-q in 1Q20 to record $4.2bn. While remittances also increased by 14% y-o-y to $6.7bn, but they continued their drop on the quarterly basis with a reduction of $0.2bn, but coming in line with Beltone analysts' expectations. Beltone analysts believe that, the service side will continue to outperform in FY20, with the rise in tourism revenues to $14bn. This coupled with an improving net oil balance, given the halt in natural gas imports starting January 2019, should support a reduced current account deficit. This will continue to support a stronger Egyptian pound in 2020 in their view.
