Egypt’s non-oil economy under strain as inflationary pressure grows: S&P Global

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RIYADH: Business conditions in Egypt’s non-oil economy continue to be under strain with the country’s Purchasing Managers’ Index staying unchanged at 47.6 in September compared to the previous month, according to S&P Global.

According to S&P Global, a PMI above 50.0 marks growth, while those below 50.0 signals contraction.

Egypt’s PMI signals a solid deterioration in business conditions, albeit one that was the joint-weakest for seven months, as inflationary pressures, energy rationing, import restrictions, and weak demand continue to impact the country’s non-oil economy.

“Non-oil activity in Egypt continued to suffer from weak demand, geopolitical tensions and surging inflation in the final month of the third quarter,” said Shreeya Patel, an economist at S&P Global Market Intelligence.

She added: “Firms nevertheless remain hopeful that macroeconomic conditions would improve in the medium-term, but for now, non-oil Egyptian businesses are challenged to operate in an environment which includes persistently high prices, weak demand and growing uncertainty.”

The report added that high prices and consumer uncertainty caused a staggering decrease in output during the last month of the third quarter.

Exports also fell in September for the second consecutive month to their lowest level in over two years.

Higher input prices — caused by increased energy, material and wage expenses — pushed retail prices through the roof, adding on to the already high rate of inflation.

Consequently, low demand interlinked with high input costs forced non-oil firms in Egypt to slow down business activity, decreasing inventory holdings to their lowest in fourteen months.

Moreover, vendors reported higher lead time due to delays at ports and restrictions on materials.

Looking at employment, headcounts rose for the third month in a row, but backlogs increased simultaneously.

However, Egypt’s future outlook on business activity improved compared to August’s near-survey low, as firms showed optimism with regards to macroeconomic conditions in the next few months.