Slump in Egypt as companies grow concerned over outlook

Egypt’s non-oil private sector activity contracted in November to its lowest levels since September 2017 as new orders fell and companies voiced concerns on the local economy, according to a new survey.

IHS Markit’s Purchasing Managers’ Index, which measures the health of the non-oil sector, declined to 47.9 in November from 49.2 in October, remaining below the 50 mark that differentiates contraction and expansion, the report found yesterday.

“Businesses highlighted concerns over the domestic economy and new business declined for the fourth consecutive month,” said David Owen, economist at IHS Markit. “The downturn was extended to foreign orders, with firms noting weakness in key export markets.”

Egypt signed a three-year, $12 billion (Dh44.07bn) extended fund facility with the International Monetary Fund in November 2016 to revive its economy through tough reform measures.

The government devalued its currency and cut subsidies at the end of 2016 to secure the loan agreement, followed by further spending cuts. The reforms helped to end a major dollar shortage, repaired overburdened finances and pulled the country out of an economic crisis, although Egyptians have nevertheless felt pressured by the austerity measures.

A “continued market slowdown” led to a drop in output and new orders while employment fell for the first time since July, according to the IHS Markit survey.

Companies reduced their output for the fourth consecutive month in response to a drop in new orders.

New business fell at a faster rate last month, which companies attributed to the slowdown in the market. Exporters also said sales dropped despite new contracts with companies in Saudi Arabia, Greece, Morocco and other countries. Responding to the drop in demand, companies also reduced their selling prices to stimulates sales. The drop in sale prices was the quickest rate in the index’s history, the report said.

Employment fell in November for the first time in four months owing to the lack of new business.

“On the positive side, inflationary pressures continued to ease, with the latest markup in input costs being the second-softest on record,” Mr Owen said.

“This allowed companies to raise input buying and also lower selling prices for the first time since May. The drop in charges may see some demand restored in future months.”

Egyptian companies’ future sentiment decreased slightly last month, with some expectation of the slowdown in market conditions to linger, the report said.

However, the overall outlook remains positive with a “high proportion” of companies expecting future output to rise in over the next 12 months.

Employment fell in November for the first time in four months owing to the lack of new business