Egypt’s non-oil business activity contracts, new orders stabilize

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Egypt’s non-oil private sector business activity continued deteriorating in July, but the contraction in output slowed and new orders stabilized after months of decline, a survey showed on Thursday.

The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for the non-oil private sector rose to 48.6 in July from 47.2 a month before but remained below the 50 mark that separates growth from contraction. Output continued to decline in July, but at the slowest pace in a year, rising to 47 from June's 45.3.

New orders ended a 21-month trend of decline in July, rising to 50 from 46.3 a month earlier. For the fourth month in a row, new exports rose in July, to 50.3 from 51 in June, as the Egyptian pound remained weak.

Egyptian exports have gained new markets since the central bank liberalized the exchange rate in November, slashing the pound's value by half, as part of a $12 billion International Monetary Fund reform program signed last year.

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 program is hoped to help restore confidence in the North African country.

“Egypt's economy appears to be stabilizing, with new orders unchanged in July following nearly two years of contraction,” said Khatija Hague, head of MENA Research at Emirates NBD.

“However, firms saw input costs rise sharply on the back of higher fuel costs as subsidies were cut further at the end of June. Inflationary pressure is likely to remain elevated as higher electricity tariffs came into effect this month.”

Egypt has raised fuel and electricity prices over the last two months in an effort to cut its budget deficit as agreed with the IMF, a move economists believe will not help in curbing inflation that has surged since the pound was floated.

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