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  • 05-04-23

    Egypt's Non-Oil Private Sector Activity Continues to Decline due to Import, Currency Restrictions, Inflation

    (MENAFN) Egypt's non-oil private sector activity shrank for the 28th consecutive month in March, according to a survey by S&P Global. The Egypt Purchasing Managers' Index (PMI) fell to 46.7 in March from 46.9 in February, indicating that business activity is still well below the 50.0 threshold that marks growth. David Owen, an economist at S&P Global, said that the PMI's sub-index for new business volumes fell steeply, driving a solid deterioration in the performance of non-oil companies.

    Despite the Egyptian pound depreciating by half since March 2022 and the country signing a USD3 billion support package with the International Monetary Fund in December, Egypt remains short of foreign currency. This is due to import and currency restrictions and rising inflation, which is affecting business. The state statistics organization reported that headline inflation reached a five-and-a-half-year high of 31.9 percent in February, up from 25.8 percent in January. Meanwhile, core inflation rose to 40.26 percent.

    The PMI's sub-index for overall input prices inched up slightly to 62.8 in March, compared to February's 62.7. The sub-index for purchase prices also rose slightly to 64.3 from 63.9. According to S&P Global, steep inflationary pressures and a drop in client demand continued to negatively impact non-oil businesses, resulting in a sharp reduction in new orders.

    The new orders sub-index fell to 44.3 in March from 44.7 in February, while the sub-index for output strengthened to 44.9 from 44.6. Inventories and employment levels also decreased, according to David Owen, an economist at S&P Global. However, the sub-index for future output expectations improved to 54.2 from 52.5 in February, which is still near an all-time low.

    Despite the slight improvement, S&P Global stated that the year-ahead outlook for activity was still among the weakest recorded since the series began in early 2012. The ongoing difficulties with accessing key inputs due to import controls and currency restrictions are largely responsible for the fall in output levels across the non-oil private sector in March.

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