India current account deficit widens sharply on higher imports

Indian laborers carry large baskets holding vegetables to a wholesale market in Kolkata. A rise in imports has widened the country’s current account deficit. (Reuters)
Updated 17 March 2018
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India current account deficit widens sharply on higher imports

MUMBAI: India’s October-December current account deficit widened sharply from a year earlier, driven by higher imports, data from the Reserve Bank of India showed on Friday.

The deficit widened to 2 percent of gross domestic product, or $13.5 billion, up from 1.4 percent, or $8 billion, in the corresponding period a year ago.

“The widening of the deficit on a year-on-year basis was primarily on account of a higher trade deficit brought about by a larger increase in merchandise imports relative to exports,” the RBI said in a statement on India’s balance of payments.

India’s trade deficit widened to $44.1 billion from $33.3 billion a year ago while the balance of payments posted a surplus of $9.4 billion in the October-December period, compared with a deficit of $1.2 billion a year ago, helped by a stronger capital account.

The capital and financial account surplus rose to $12.6 billion in the December quarter from $7.3 billion a year ago, bolstered by robust foreign portfolio inflows worth $5.3 billion during this period, the RBI said.

“The current account deficit is expected to widen in the next fiscal year 2018/19 on firm oil prices,” said A Prasanna, chief economist at ICICI Securities Primary Dealership in the financial capital of Mumbai.

“The current account deficit alone is not a big risk, but a combination of higher current account and fiscal deficit and inflation is expected to weigh on the rupee,” he added.

Prasanna expects India’s current account deficit to stand at 2 percent of GDP in the fiscal year ending in March 2018 and then widen to 2.3 percent in the next fiscal year.

Despite the widening of the current account gap, the rupee currency outperformed most of its Asian peers in 2017, boosted by strong dollar inflows, but has become one of the region’s weakest, falling by 1.65 percent in 2018, as inflows slowed.


Egypt stock market plunges as retail investors take flight

Updated 19 September 2018
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Egypt stock market plunges as retail investors take flight

  • Biggest index drop in Egypt since mid-2016
  • Saudi Arabia outperforms in Gulf

LONDON: Egyptian stocks tumbled to their lowest level this year on Wednesday as retail investors took flight.
A sharp rise in Suez Canal revenues, a major foreign exchange earner for the country, was not enough to quell investors concerns about the strength of the currency.
The main Egyptian stock index lost 3.8 percent which some fund managers blamed on generally negative sentiment toward emerging markets worldwide as well as more local speculation about possible currency devaluation.
“Our channel checks suggest the sell-off in the Egyptian market is local retail and institutions driven, on currency fears and speculation over a further round of devaluation,” said Vrajesh Bhandari, portfolio manager at Al Mal in Dubai, Reuters reported.
“Selling is further intensified as margin calls are triggered and technical support levels break down. The country canceled three consecutive Treasury auctions, citing investors’ unrealistic yield demands.”
Egypt’s Suez Canal revenues rose to $502.2 million in August up 6.7 percent from a year earlier according to official data released on Wednesday.
Elsewhere regional stock markets closed mostly lower with the exceptions of Abu Dhabi which edged 0.2 percent higher and Saudi Arabia, the best regional performer, which rose by 1.1 percent.
Saudi stocks are benefiting from the strong oil price which eased slightly yesterday but still hovered just under $79.
OPEC and some other oil producers including Russia will meet in Algeria on Sept. 23 to discuss how to allocate supply increases within their quota framework to offset the loss of oil exports from Iran following the introduction of sanctions by the US.
Those measures will come into force on Nov. 4 and data suggests that buyers are already retreating from Iranian crude purchases.
A key question for the oil price as well as regional stock markets in the weeks ahead will be the extent to which other Gulf oil exporters can compenaste for the loss of Iranian supplies by pumping more.