Egypt's non-oil business activity contraction slows slightly: PMI

CAIRO - 6 September 2017: Egypt’s non-oil private sector business activity shrank in August at the slowest pace since July last year amid a decline in new orders and a jump in exports, a survey showed on Wednesday.

The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for the non-oil private sector rose to 48.9 in August from 48.6 a month before but remained below the 50 mark that separates growth from contraction.

Output continued to decline in August, but improved from the previous month, with the related subindex standing at 48.8, compared with 47 in July, the survey showed.

New orders declined in August, reaching 49.5 from 50 the previous month, when it briefly ended a 21-month trend of decline.

For the fifth month in a row, new exports rose, with the subindex climbing to 53.7 from 50.3 in July, as the Egyptian pound remained weak.

Egyptian exports have gained new markets since the central bank liberalized the exchange rate in November as part of a $12 billion International Monetary Fund reform programme. The pound has lost half its value since the float.

The economy has been struggling to recover since a 2011 uprising scared tourists and investors away, two main sources of foreign currency, but the three-year IMF programme is expected to help restore confidence in the North African country.

“Egypt’s PMI improved further in August, although it remains in contraction territory at 48.9. New orders declined only marginally after stabilizing in July, and new export orders increased at the fastest rate since May,” said Khatija Hague, head of MENA Research at Emirates NBD.

Hague expected the inflation rate to remain high in August as a result of the hike in electricity prices. Egypt has raised fuel and electricity prices in an effort to cut its gaping budget deficit as agreed with the IMF.