Egyptian businesses yet to feel effect of $60bn new funding

Mohamed Abd El Ghany/Reuters Connect

• Egypt’s PMI down to 47.4 in April
• $60bn funding yet to trickle down
• Conditions ‘remain challenging’

The close to $60 billion in new funding announced for Egypt in recent months has yet to trickle down to average business people in the country, according to the results of a new monthly survey.

Difficult market conditions in Egypt continued in April as the monthly S&P Global Purchasing Managers Index (PMI) slid from 47.6 in March down to 47.4 in April, marking the country’s 41st consecutive month below 50.

Any score on the index below 50 indicates economic contraction, while anything above it points to positive growth.

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Despite the continued slide in Egypt’s PMI, participants in the survey were confident for the future due to “hopes of exchange rate stability, lower prices and better material availability”. 

The survey follows two months of high-profile developments within the Egyptian economy, beginning with the announcement of a $35 billion investment of cash and debt relief by the Emirati sovereign wealth fund ADQ to develop Ras al Hekma.

The deal was followed by the devaluation of the Egyptian pound, the finalisation of an $8 billion extended fund facility from the International Monetary Fund and other large loan agreements from the World Bank and European Union.

Despite these developments, Phil Smith, an economics associate director at S&P Global Market Intelligence, said in a note accompanying the PMI that “business conditions remain challenging across Egypt’s non-private sector” and that the index’s slide reflected “a renewed fall in employment as well as sustained downturns in output and new orders”.

Employment in non-oil sectors also decreased slightly in April, after it had picked up in the previous month. Companies raised staff pay for April, the survey suggested, but did so at the slowest rate in four months.

While S&P said businesses report greater availability of foreign currency, local foreign exchange supply-demand imbalances were still unwinding throughout April. 

On the pricing front, the survey showed a considerable easing of inflationary pressures. The overall rate of input cost inflation fell to its lowest in over three years.

In his note, Smith wrote “average prices charged for goods and services rose at a much slower rate in April, which could feed through to lower headline inflation in the coming months”.