Egypt’s non-oil business slows for 6-month in row
cairo — Business activity in Egypt shrank for the sixth straight month in March, a survey showed on Wednesday, as declines in new orders and output caused the biggest contraction in the survey in over two and a half years.
Egypt has been struggling to revive its economy since a popular uprising in 2011 and subsequent political upheaval that have driven both investors and tourists away, depriving it of the foreign currency it needs to import raw materials.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector fell to 44.5 points in March from 48.1
Looking ahead, we believe that the move to a more competitive exchange rate has now reduced a key source of risk
Jean-Paul Pigat, Senior economist at Emirates NBD
points in February, remaining below the 50-point mark that separates growth from contraction.
Egypt’s central bank had devalued the pound to 8.85 per dollar from 7.73 on March 14 and an- nounced it would pursue a more flexible exchange rate. It later strengthened the pound to 8.78 per dollar. Economists say the pound is still over-valued.
“The deterioration in business conditions is not entirely surprising as the survey took place at a time of elevated uncertainty that coincided with the devaluation of the Egyptian pound,” said Jean-Paul Pigat, senior economist at Emirates NBD. “Looking ahead, we believe that the move to a more competitive exchange rate has now reduced a key source of risk, and could therefore set the stage for a broader economic recovery in the second half of 2016,” Pigat said. New orders tumbled to 42.3 points in March from 48.2 pounds in February. The decline was the sixth consecutive drop and the fastest in two and a half years.
The output subindex also fell for the sixth month in a row, to 40.7 points in March from 47.4 points in February.
Purchasing costs rose to 78.8 points in March from 61.5 points the month before.“According to panellists, the devaluation of the Egyptian pound relative to the US dollar led to a steep rise in purchasing costs during March,” Markit, which compiled the data, said in a report.