May 13, 2017 - Egypt trade balance is characterized by consistent deficit. .... 1999), Lebanon (March 1999), Libya (Janu
Issue 13 May, 2017
Egypt Trade Balance Situation and Outlook
Table of Contents
Introduction Q1 What is the History of Exports and Imports in Egypt? Q2 What are the Major Imports and Exports? Q3 What is the Current Status of Egypt Trade Balance? Q4 What are the Future Prospects of Trade Balance? Conclusion
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Introduction
Egypt trade balance is characterized by consistent deficit. The trade balance is highly dependent on oil exports, which is a major source of foreign income along with tourism receipts. As the country is implementing an economic reform program, the market has witnessed difficulties with imports as the government has introduced a number of restrictions. For instance, the Ministry of Trade and Industry issued a decree that imposes a mandatory obligation on factories looking to import their product into the Egyptian market. In 2016, several restrictions have been imposed, yet it is worthy to mention that there has been a retreat in trade deficit in Q12016/2017 by 46%.
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Question 1
What is the History of Exports and Imports in Egypt? ➢ During Mohamed Ali era (1805-1848), foreign trade was the prime driver of the economy, and local prices were close to those in Europe due to the increase in exports and imports, particularly with the progress made in transportation. ➢ Egypt during Mohamed Ali Era witnessed food self-sufficiency for the first time. Egypt exported its surplus rice and wheat, together with that of corn and beans, to meet the needs of factories and the army. ➢ Egypt exported cotton to Europe in exchange for the import of machinery and expertise. ➢ The value of imports in Egypt used to be equal to about one-third and exports about one-tenth of GDP. Since the World War II, exports have tended to fall short compared to imports. The trade deficit was particularly sizable during Nasser era and between from 1960 to 1965 as expenditure on development increased, reaching a peak in 1966. ➢ After the 1973 war, there was a dedicated effort to restrict imports and stimulate exports, but this effort didn’t meet the expected results.
The trade deficit increased to record high levels in the early and mid-1980s, largely because of the decline in revenue from petroleum exports and the increase in food imports. These problems have persisted in the early 21st century. The large trade deficit was partially offset by transfers from abroad, such as aid from Western governments and remittances from Egyptians working in other countries.
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Question 1
What is the History of Exports and Imports in Egypt?
Total Imports (2009-2016) BN/USD 59.2 50.0
54.0
57.6
60.1
Total Exports (2009-2016) BN/USD 61.3
57.3
26.9 23.8
25.0
26.9
26.0 22.2 18.7
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
2015/2016
➢ Egypt total imports have declined by 6% in 2015/2016 reaching 57.3 BN USD compared to 61.3 BN USD in 2014/2016. ➢ It is worthy to mention that the largest level of imports was in 2014/2015. ➢ In addition, total exports have also declined by 16% in 2015/2016 reaching 18.7 BN USD compared to 22.2 BN USD in 2014/2015. ➢ The largest level of exports was in 2007/2008 reaching 29.8 BN USD. ➢ Egypt exports has reached 5.2 BN USD in Q1-2016/2017, while imports has reached 13.9 BN USD in the same period.
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What are the Major Imports and Exports? Question 2
Commodities Exports by Commodity (Q1-2016/2017)
Imports by Commodity (Q1-2016/2017) Petroleum products Spare parts and accessories for cars and tractors
4% 4% 4%
3%
Crude Oil
3% 3%
Petroleum products
4%
Medicines
4%
Textiles
Meat and offals
5% 41%
Passenger vehicles
5%
Pharmaceutical preparations, gauze pads, vaccines
5%
Polypropylene
27%
4% 4%
Ready-made clothes 5% Fresh, chilled, or cooked vegetables 5%
Gold
Wheat 5%
Organic and inorganic compounds
6%
6%
Wires and cables 19%
Household electrical appliances 6%
6%
6%
Textiles Communication and telephone equipment
Household electrical appliances
Ethylene-propylene polymer 17%
Milk, Dairy products Phosphate or mineral fertilizers
Spare parts for machines and appliances
➢ The category that Egypt imports the most is petroleum products, and the region with most active imports is the European Union. On the other hand, the product that Egypt exports the most is crude oil with heavy levels directed to European Union. ➢ EU imports of goods from Egypt in 2016 are dominated by fuel and mining products, followed by chemicals and textiles and clothing. EU exports to Egypt consist mainly of machinery and transport equipment, chemicals, fuels and mining products and agricultural products.
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What are the Major Imports and Exports? Question 2
Countries Imports by Geographical Distribution 2009-2016
70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2009/2010 African Countries
2010/2011
2011/2012
Other Countries and Regions
Asian Countries
2012/2013 Arab Countries
2013/2014 USA
2014/2015
Russian Federation & C.I.S
2015/2016
Other European Countries
EU
Exports by Geographical Distribution 2005-2016 30,000 25,000
20,000 15,000 10,000 5,000 0 2009/2010 Other Countries and Regions
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2010/2011 Asian Countries
2011/2012 Arab Countries
2012/2013 USA
2013/2014 Russian Federation & C.I.S
2014/2015 Other European Countries
2015/2016 EU
What are the Major Imports and Exports? Question 2
Volume of Trade 1.5 BN USD 1.3 BN USD 1.2 BN USD 1 BN USD
1 BN USD 0.90 BN USD 0.82 BN USD 0.70 BN USD 0.57 BN USD
0.51 BN USD 0.50 BN USD
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The EU is traditionally Egypt's main trading partner, covering 31.3% of Egypt's trade volume in 2016 and ranked both as Egypt's first import and export partner.
What are the Major Imports and Exports? Question 2
Bilateral Agreements
➢ Egypt has signed several bilateral agreements with Arab Countries: Jordan (December 1999), Lebanon (March 1999), Libya (January 1991), Morocco (April 1999), Syria (December 1991), and Tunisia (March 1999). Additionally, in 1995, Egypt and China entered into a trade accord. Egypt also signed an economic treaty with Russia. ➢ In June 2001, Egypt signed an Association Agreement with the European Union (EU) which entered into force in 2004. The agreement provided for immediate duty free access of Egyptian products into EU markets. In 2010, Egypt and the EU completed an agricultural annex to their FTA, liberalizing trade in over 90% of agricultural goods.
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What are the Major Imports and Exports? Question 2
Egypt & US
Bilateral Agreements
➢ Before September 1994, the two major bilateral trade agreements between Egypt and the United States were a Market Access Agreement for Textiles and Clothing signed in 1973 and the Bilateral Investment Treaty signed in September 1982. The signing of the U.S.-Egyptian Partnership for Economic Growth and Development in September 1994 was an important milestone in the two countries' relationship. ➢ United States and Egypt advance bilateral trade and investment agreement; Two-way goods trade between the United States and Egypt was valued 9.1 BN USD during 2010, an increase of more that 30% compared to 2009. ➢ Egypt signed the Common Market for East and South Africa (COMESA) agreement in 1998. Application of customs exemptions on imports from other member countries. ➢ Egypt, Kenya, Sudan, Mauritius, Zambia, Zimbabwe, Djibouti, Malawi, Madagascar, Rwanda, and Burundi grant goods and products having COMESA certificates of origin have full exemption from customs duties and any other duties and charges having equivalent effect. ➢ The Agadir Agreement was signed by Egypt, Morocco, Tunisia and Jordan in 2004. ➢ All the industrial and agriculture products are exempted from the entire tariff and the non-tariff measures as soon as the agreement is into effect.
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Question 3
What is the Current Status of Egypt Trade Balance?
Trade Balance (BN USD) (2009-2020E)
-25.1
-27.1 -34.2
-30.7
-34.1 -39.1
2009/2010
2010/2011
2011/2012
2012/2013
2013/2014
2014/2015
-38.6
2015/2016
-36.2
2016/2017E
-38.7
2017/2018E
-39.0
2018/2019E
-41.5
2019/2020E
-43.5 2020/2021E
➢ Egypt is facing a trade deficit as shown in the chart above. Egypt trade deficit has increased in 2015/2016, but according to the IMF, it is expected to decrease from 38.6 BN USD in 2016 to 36.2 BN USD in 2017. ➢ Egypt trade deficit has declined by 46% in Q1-2017 reaching 8.6 BN USD compared to 12.3 BN USD in Q1-2016. This decline can be attributed to the efforts of import reductions and substitutions as part of the comprehensive economic reform program.
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Question 4
What are the Future Prospects of Trade Balance?
The Egyptian government has taken action to decrease the imports and increase the exports since 2017. This decision was taken due to the currency crisis. ➢ Egypt plans to import 108 cargoes of liquefied natural gas (LNG) this year as the country prepares to start producing at two gas fields and move closer to its goal of self-sufficiency and even exports by 2019. It is worthy to mention that Egypt was the net exporter of LNG until 2014, when declining output and power shortages resulting from political upheaval forced the country to divert fuel for its own use and turned the most populous Arab nations into a net importer. ➢ Egypt started to export limited amounts of LNG from the Idku plant in September 2016 to keep equipment at the terminal running, and it plans to run the facility on the Mediterranean coast at full capacity for export in 2021. ➢ Egypt will start exporting gas in 2019. Gas exports will bring much needed foreign cash to Egypt.
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Conclusion
The country has been suffering a chronic economic problem related to the trade balance evident through consistent deficit level. Since the 25th revolution the pound has been facing considerable pressure due to the gap between the exports and imports. Later, the devaluation of the pound had an impact on increasing the exports and decreasing the imports, which is evident by the recent drop in the trade deficit by 46%. However, the sustainability of the deficit decline is greatly dependent on the import substitution efforts, the gas fields, and the implementation of the economic reform program components collectively.
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