Egypt private sector shrinks in November after devaluation

REUTERS/Mohamed Abd El Ghany

Egypt’s non-oil private sector shrank in November at its sharpest rate since the outbreak of the coronavirus pandemic in early 2020, with a weaker currency weighing on the cost and the availability of foreign goods, a survey showed on Monday.

The S&P Global Egypt Purchasing Managers’ Index (PMI) slid to 45.4 in November from 47.7 in October, well below the 50.0 threshold that separates growth from contraction.

It was the second lowest reading since the pandemic dragged the index down in June, 2020, and the 24th consecutive month of contraction.

“Central to the downturn was a rapid decrease in business activity, as survey panellists reported that accelerated cost rises and falling new orders forced them to cut output,” S&P Global said.

Egypt has been suffering a severe shortage of foreign currency despite a 14.5 percent devaluation on October 27 and the announcement of a $3 billion support package with the International Monetary Fund. The lack of dollars has tightened the flow of imports for factory and retail inputs.

“The pound’s depreciation against the US dollar led to a marked increase in prices paid for raw materials, which have already been exacerbated by import restrictions since early-2022,” said S&P Global economist David Owen.

The PMI’s sub-indices for both overall input prices and purchase prices deteriorated to 72.4, their highest since July 2018, from October’s 63.5.

The sub-index for future output expectations improved to 55.7 after falling to a record low of 52.2 in October.

“Concerns about high inflation, rising interest rates, currency weakness and a global economic slowdown remained dampeners on sentiment,” S&P said.