Firms expect improvement in exports, investment policy, stock market, energy system

Most firms expect improvements in exports in the coming quarter, as well as in investment policy, due to a more enabling environment availing to increase foreign direct investments, according to the Business Barometer (BB) March 2018 survey by the Egyptian Centre for Economic Studies (ECES).

The BB said that firms expect improvement in the stock market due to the recent amendments to the capital market law. Firms also expect improvement in the energy system due to the government’s efforts in establishing new and renewable energy projects as well as making opportunities available for investors to invest therein.

The survey also noted that most large firms expect final product prices and wages to continue rising, exceeding the previous quarter. It also expects a similar trend for input prices, albeit slightly less than in the previous quarter, which can be explained by expectations of further reduction in petroleum subsidies and a continued rise in energy prices.

ECES publishes its BB survey quarterly as part of its role in providing timely information about the developments of economic activity in Egypt based on macroeconomic indicators. The survey covers 120 firms’ assessments of economic growth and results of their own operations during the quarter under study, as well as their outlook for the Egyptian economy and in terms of their own production, domestic sales, exports, commodity inventories, capacity utilisation, prices, wages, employment, and investment.

The surveyed firms cover manufacturing (50%), financial services (13%), construction (12%), transportation (10%), tourism (9%), and telecommunications (7%). The survey is conducted on a number of micro, small, medium, and large firms as defined by the Central Bank of Egypt (CBE).

“Most large firms and SMEs expect higher investment during the January-March quarter of FY 2017/2018 compared to the previous quarter. However, large firms expect employment to remain unchanged, while SMEs expect higher employment, which is in line with their expectations for economic activity,” the report read.

The report highlighted the major constraints facing the business sector, such as inflationary pressures, corruption, difficulty in interacting with government authorities, and the tax system. In particular, firms expressed concern about rising inflation, corruption, difficulty in interacting with government authorities, and the tax system.

Meanwhile, the order of constraints remains relatively similar to that of the previous survey, indicating minimal progress in removing constraints. Further, obtaining funding from the stock market was ranked as the smallest constraint.

The BB explained that 39% of respondent firms said that economic growth was higher in Q1 2018, compared to last quarter of 2017, while, 61% of the respondents see that the growth was the same, but none of the respondents see that economic growth has decreased.

The report noted that 43% of respondents see that exports were higher, but the same proportion see that they were the same. Meanwhile, 14% of firms see that exports fell.

The final product prices were higher compared to the last quarter of 2017,according to 43% of the respondents. Nevertheless, 57% of them see that it was the same. Moreover, none of them see that they lowered.

For wages, 58% of the firms believe that wage levels were higher in Q1 2018 compared to Q4 2017, and about 42% of them see that wage levels were the same in the comparison period. None of the respondents see that the wage level was lowered. For the employment rate, 19% of respondents see that it was higher in the comparison period, while a 77% majority of them see that it was the same, but only 3% of them see that it decreased.

In terms of investments, 42% of firms see that investments in Q1 2018 were higher than Q4 2018, while 58% of them see that they were the same. None see that they were lowered.