Egypt: Non-oil sector faces deterioration amid economic challenges
The S&P Global Egypt Purchasing Managers’ Index (PMI) fell to an 11-month low of 47.1 in February from 48.1 in January. As a result, the index moved further below the 50.0 no-change threshold—it has been in contractionary territory since December 2020—and signaled a faster deterioration in non-oil private sector operating conditions compared to the previous month.
February’s downturn was primarily due to new orders plunging at the quickest rate in nearly a year; high inflation weighed on demand, especially domestically. Consequently, output and employment also saw steeper declines, partly reflecting diminished activity and tourism due to Israel’s war on Hamas.
Regarding prices, input price inflation hit a 13-month high: The sharp decrease in Suez Canal freight volumes due to the Red Sea shipping crisis led to falling foreign currency inflows. These lower currency inflows exacerbated the ongoing foreign exchange crisis and led to higher import prices. Consequently, selling charges also rose steeply. Despite expectations for continued challenges in the year ahead, business confidence rose slightly from January.
David Owen, senior economist at S&P Global, commented on the outlook for operating conditions:
“Despite Egypt’s headline inflation rate dropping eight percentage points over the last four months, the latest results signal that it could reaccelerate in the near future, which looks likely to prolong the downturn and leave business confidence subdued. Indeed, firms’ expectations for the coming year remain mild, while faster cuts in employment and purchasing suggest they are planning for a prolonged reduction in output.”