Remittances from Egyptians working abroad rose to the highest level in at least two years in the second quarter this year, helping narrow the country’s current account deficit, central bank data showed.
The remittances surged to $3.2 billion, a 78 percent jump from the same quarter a year earlier, according to a faxed statement sent by the central bank in Cairo. For the fiscal year that ended in June, remittances rose 25 percent to $9.5 billion.
“Remittances were a big surprise,” Mohamed Abu Basha, an economist at Egyptian investment bank EFG-Hermes Holding SAE, said in a telephone interview. “This is the biggest quarterly jump since at least 1997.”
More than half of the transfers are sent by Egyptian workers in Gulf Arab countries, mainly Saudi Arabia, Abu Basha said. The money helped boost consumer spending, which remains the backbone of the country’s economic growth. Egypt’s economy expanded 5.3 percent in the 12 months through June, up from 4.7 percent in the previous fiscal year.
Egyptian workers began flooding into the Persian Gulf in the 1970s to look for jobs, benefiting from a spending spree on infrastructure projects in those countries during a period of high oil prices.
The Saudi economy excluding oil may expand 4.5 percent in 2010 according to the International Monetary Fund, compared with 3.3 percent in the previous year. The labor-importing economies of Kuwait, Qatar, the United Arab Emirates and Bahrain are also projected to grow this year, according to IMF forecasts.
Egypt’s trade deficit was stable at $25.1 billion, the central bank said in the statement. Tourism revenue rose 10.5 percent to $11.6 billion. Overall, the current account deficit narrowed 2.4 percent to $4.3 billion in the fiscal year.
Rise in Investment
Foreign direct investment into Egypt also surged to $2.5 billion between April and June, the highest quarterly level in the fiscal year, the central bank said. Investments for the entire year fell 17 percent to $6.8 billion.
Net portfolio investments registered inflows of $7.9 billion for the year, compared with an outflow of $9.2 billion in the previous 12 months. About $5 billion of the portfolio investments were in treasury bills, the central bank said.
“The current and capital account numbers are strong and the upward quarterly trend shows Egypt catching the updraft in the emerging markets-led global recovery,” Simon Williams, the Dubai-based chief Middle East economist at HSBC Plc, said by e- mail. The government is targeting an economic growth rate of 5.8 percent in the current fiscal year, according to the Ministry of Economic Development.
The Egyptian pound has lost 3.8 percent against the U.S. dollar this year, according to data compiled by Bloomberg.