Reforms including devaluation of pound and reduction in subsidies lifted non-oil activity
Egypt PMI rises in November, reversing 25 months of decline
Egypt's non-oil private sector economy turned the corner in November after more than two years of deterioration as a spate of economic reforms including the devaluation of the country's currency and a reduction in energy subsidies began to bear fruit, according to a PMI gauge.
The Emirates NBD Egypt Purchasing Managers' Index rose to 50.7 in November from 48.4 in October. A reading above 50 suggests that the non-oil economy is growing, while a reading below 50 suggests a contraction. The survey is sponsored by Emirates NBD, Dubai's biggest bank by assets, and produced by IHS Markit, a financial information services company.
"Egypt's PMI reading turned positive in November, signaling an expansion in the non-oil sector for the first time in two years," said Daniel Richards, Middle East and North Africa economist at Emirates NBD.
"This suggests that the wide-ranging economic reforms embarked upon in November 2016 as part of an IMF-sponsored program are beginning to bear fruit. Strong sentiment towards future prospects chimes with our view that the Egyptian economy will continue to strengthen over the coming quarters."
Foreign demand for Egyptian goods and services reached a record high last month. Most of that demand came from an increase in demand from neighbouring countries, IHS Markit found, based on anecdotal evidence.
The survey found that the purchasing managers polled in over 450 private sector companies were positive about future growth because of an expected uptick in economic growth.
The IMF said last month that it agreed to the disbursement of a US$2 billion loan after a review of Egypt’s economic reforms, which will take the total amount disbursed to $6bn since the three-year $12bn aid package was announced last year.
Under the IMF programme's loan conditions, Egypt devalued its currency last year and cut energy subsidies. This saw the value of the Egyptian pound halve against the dollar and inflation soar to 30 per cent, though consumer prices have dipped in the last three months.
The IMF said the Egyptian economy picked up in the fiscal year ending June 2017, growing by 4.2 per cent and beating projections of 3.5 per cent growth.
The IMF program has led to increased international investments and a recovery in the country's foreign reserves which have more than doubled since the loan deal was reached. Last month, Egypt foreign reserves rose to $36.72bn from $36.70bn in October.
Renaissance Capital, the investment bank owned by the Russian billionaire Mikhail Prokhorov, is among investors taking a long-term bet on Egypt even as tensions in the region are on the rise, Bloomberg News reported last month.