Egypt’s business recovery signals broad stabilisation in the economy

Dubai: Egypt’s Purchasing Managers’ Index (PMI) for March 2019 broadly indicated stabilisation of the health of the Egyptian non-oil private sector economy.

The headline PMI rose from 48.2 in February to 49.9 in March. The latest reading was the highest for seven months, with improvement last seen in August 2018.

“Egypt’s PMI rose to a seven-month high of 49.9 in March, just shy of the neutral 50 level, which delineates contraction and expansion in the non-oil private sector economy. This represents a significant improvement from the 17-month low of 48.2 recorded in February, though the continued negative performance of the private sector reaffirms our decision to downgrade our 2018/19 real GDP growth forecast from 5.5 per cent to 5.3 per cent,” said Daniel Richards, Mena Economist at Emirates NBD.

Key to the uptick in the PMI was a slight rise in new orders in March. Demand for Egyptian goods and services grew for the first time in seven months, as businesses noted stronger market movement and increased tourism. New export orders continued to decline, which panellists related to a lack of foreign contracts.

With overall new orders increasing, some Egyptian businesses responded by lifting activity. The Output Index posted fractionally below the 50.0 neutral mark, as greater activity due to higher sales at a few firms was offset by reduction at others.

Meanwhile, employment at Egyptian companies fell for the sixth month running in March. Input price inflation descended to a new record low during March, particularly due to reduced price pressures on input purchases. Egyptian businesses reacted with a fractional uptick in output charges, ending a two-month sequence of declining prices.

Future expectations slipped in March from February’s ten-month high. Some businesses expressed worries that stagnation in the economy would reduce activity over the coming year.

“Our expectation remains that there will be an improvement in the PMI reading over the remainder of the year. This will in part be fuelled by easing monetary policy; the Central Bank of Egypt (CBE) implemented its first cut of 2019 in February and we anticipate more cuts over the course of 2019,” said Richards.