Skip to content Skip to Search
Skip navigation

Egypt’s economy weakens as long wait for reforms goes on

Workers at an Egyptian startup producing tiles from recycled materials. S&P's PMI for May reported a near-stabilisation in manufacturing Reuters/Hadeer Mahmoud
Workers at an Egyptian startup producing tiles from recycled materials. S&P's PMI for May reported a near-stabilisation in manufacturing
  • Non-oil activity contracted for 30th month in May, S&P survey found
  • But headline PMI figure of 47.8 was highest since February 2022
  • ‘Things will only get better’ when Cairo adopts IMF plans, analysts say

Egypt’s non-oil private sector activity contracted for the 30th consecutive month in May, but at a slower pace than the previous 15 months, according to S&P Global’s latest survey. 

Businesses told S&P’s Egypt Purchasing Managers’ Index that high inflation continued to dent sales, output and purchasing. Some of those surveyed for May’s report, issued on Monday, said client orders were recovering.

Analysts have said Egypt’s economy will not improve significantly until the government implements structural reforms – which the IMF and Gulf states have been demanding for more than a year. 

Mohamed Abu Basha, head of macroeconomic analysis at EFG Hermes, told AGBI the continued contraction was not surprising given high inflation and uncertainty around the future management of the Egyptian pound.

S&P said Egypt’s PMI rose from 47.3 in April to 47.8 in May – still below the 50.0 mark that indicates growth but the highest reading since February 2022. The report also pointed to near-stabilisations in the manufacturing and services sectors.

David Owen, senior economist at S&P Global Market Intelligence, said in a note that inflationary pressures could dissipate further. “Companies signalled that input cost pressures were again much softer than at the beginning of the year, as a period of stabilisation in the Egyptian pound versus the US dollar helped to cool import markets.

“This led to another relatively soft rise in selling charges, providing some hope that consumer price inflation will fall again in May.”

The S&P survey found that sales to foreign customers decreased at the slowest rate in 2023. This may be a sign that Egypt’s weakening currency is making exports more attractive, according to James Swanston, emerging markets economist at Capital Economics.

Egypt’s headline inflation fell to 30.6 percent in April, from 32.7 percent in March. Core inflation, which strips out volatile food and energy prices, dropped from an all-time high of 40.3 percent in February to 39.5 percent in March and 38.6 percent in April. 

“As things stand, we have passed the peak of the headline inflation rate,” said Swanston of Capital Economics. “But it could be a bumpy few months.” 

Swanston pointed to the importance of the IMF reforms. “Without that credible commitment, Egypt’s economy will continue to struggle and underperform over the coming years, he said.

Since the IMF agreed an extended-fund facility for Egypt last October, the government has come under increasing pressure to implement structural reforms, support private sector growth, reduce the state’s footprint in the economy and move towards a more flexible currency policy. 

Analysts say speculation over when and how Cairo will take action is the main cause of uncertainty.

“We are waiting to see what measures the government will take,” said Abu Basha. “Things will only get better when they do what they need to do.”

Latest articles

An artist's impression of part of the Diriyah Square development

Diriyah Square planned for historic Riyadh district

A public space featuring 400 retail outlets and 100 restaurants and cafes is planned for the historic Riyadh district of Diriyah. Diriyah Square will be announced next week at the World Retail Congress in Paris and aims to attract a combination of international retail brands and local artisans.  Diriyah Gate Development Authority group CEO Jerry […]

Nature, Undersea cables account for as much as 90 percent of Europe-Asia telecommunications, Water

Iraq and Kuwait team up for European telecom corridor

Iraq’s Informatics and Telecommunication Public Company, a division of the Ministry of Communications, has signed an agreement with Kuwait’s Zajil Telecom to create a telecommunications corridor from the Gulf region to Europe, transiting through Iraq and Turkey. The new route will pass through Iraqi sea and land ports. Iraq’s minister of communications Hayam Al-Yasiri said […]

Passengers at Beijing Capital International Airport. Air China will fly from the airport to Riyadh three times a week.

Third Chinese airline to launch flights to Saudi Arabia

Air China is set to begin flights to Riyadh in May, becoming the third Chinese airline to establish a route to Saudi Arabia. It joins China Southern and Eastern Airlines in connecting China with the kingdom.  Air China’s Airbus A330-300 will serve the Beijing-Riyadh route three times a week. The expansion in capacity between the […]

Highway traffic in California. Opec said the upcoming 'driving season' in the US will provide the usual additional demand for fuel

Opec stands by predictions for oil demand growth

Opec predicts robust fuel use this summer and has stuck to last month’s forecast of relatively strong growth in oil demand in 2024 and 2025. The oil producers’ organisation predicted in its monthly report that global demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. […]