Abu Dhabi, UAEWednesday 21 August 2019

Egypt’s non-oil private sector activity contracts in March

Companies responded to higher new orders with a rise in output last month, which rose to the highest level since August

FILE PHOTO: Egyptian President Abdel Fattah al-Sisi is implenting tough economic reforms as part of an IMF-backed programme. The Egyptian Presidency/Handout via REUTERS/File Photo. 
FILE PHOTO: Egyptian President Abdel Fattah al-Sisi is implenting tough economic reforms as part of an IMF-backed programme. The Egyptian Presidency/Handout via REUTERS/File Photo. 

Egypt's private sector activity contracted in March for the seventh consecutive month but reached the highest levels since August as orders grew, according to a new survey.

The Emirates NBD Purchasing Manager's Index, a composite indicator of the non-oil private sector's health, rose to 49.9 in March, a "significant improvement" from the 17-month low of 48.2 in February, the lender said on Sunday. A reading above 50 signals growth, while levels below 50 indicate contraction.

"New orders turned positive in March for the first time since August last year, which in turn saw output contract only marginally," Daniel Richards, Middle East and North Africa economist at Emirates NBD, said. "The boost in orders appears to have been domestically driven, as export orders remained contractionary, albeit at a slightly slower pace than the multi-year low recorded in February."

Egypt, Africa's third-largest economy, is implementing reforms under conditions for a three-year $12 billion (Dh44bn) aid package extended by the International Monetary Fund in 2016. The measures include raising energy, electricity and transport prices, floating the pound and containing the fiscal deficit.

The improved reading signals "a broad stabilisation of the health of the Egyptian non-oil private sector economy", the report said.

Domestic demand for Egyptian goods and services for the first time in seven months drove growth in new orders. Companies reported stronger market movement and increased tourism, which led to higher sales and contract signings.

Companies responded to higher new orders with a rise in output last month, which rose to the highest level since August.

Input prices fell in March to a new record low, especially due to "reduced price pressures on input purchases", the report said.

However, employment continued to drop at Egyptian companies for the sixth consecutive month in March.

"Despite some firms increasing their workforce numbers, others reported lower staff levels because of retirements and people leaving for other companies," it said.

Some businesses are worried that stagnation in the economy would reduce activity over the coming year but overall maintained a positive outlook due to growth in new orders and a further boost to tourism.

Emirates NBD expects Egypt's PMI levels will improve in 2019.

“The index will begin to broach the 50 level more consistently, having done so just three times in 2018," Mr Richards said. "This will in part be fueled by easing monetary policy; the Central Bank of Egypt implemented its first cut of 2019 in February and we anticipate more cuts over the course of 2019."

Updated: April 7, 2019 12:52 PM

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