Today, Sunday, a survey showed that non-oil private sector activity in Egypt began contracting for the twenty-sixth consecutive month, with businesses hit hard by high inflation and persistent foreign exchange deficits.
The Standard & Poor’s Global Purchasing Managers’ Index for Egypt fell to 45.5 in January from 47.2 in December, well below the neutral 50 level, indicating growth in economic activity.
“Egypt’s non-oil economy experienced a sharp deterioration in operating conditions in January as the fall of the pound led to a significant acceleration in price pressures,” S&P Global said.
The combined producer price sub-index rose to 72.3 from 65 in December, and the input price sub-index rose to 72.7, the highest reading in months since the currency’s halving since the previous agreement with the International Monetary Fund in 2016. The purchase price sub-index in December amounted to 64.3 points.
“Nearly half of the companies surveyed have experienced an increase in acquisition costs since the end of last year, leading to strong and rapid increases in total spending,” S&P Global said in a statement.
The Central Agency for Public Mobilization and Statistics reported last month that core inflation in Egypt jumped to a five-year high of 21.3% in December.
S&P Global indicated that increased inflationary pressures and the impact on demand led to a sharp decline in production in the non-oil sector in January.
“Some companies said import restrictions have led to further supply shortages, which has stalled operations and contributed to the continued rise in backlogs,” the companies added.
The manufacturing sub-index fell to 42.3 in January from 44.8 in December, and the new orders sub-index fell to 42.6 from 45.5.
Egypt continues to suffer from a foreign exchange shortage despite the depreciation of the Egyptian pound by about 50% since March and the country’s agreement with the International Monetary Fund for a new $3 billion bailout package in December.
“The dollar shortage has greatly exacerbated the economic problems facing Egypt in 2022 and is likely to remain a major problem this year,” said David Owen, an economist at Standard & Poor’s Global.
“Accordingly, business expectations for the next 12 months have fallen to the third lowest level on record, with companies expecting supply and pricing issues to further dampen demand,” he added.
