Egypt’s non-oil private sector activity contracted for the sixth consecutive month in February, falling to its slowest since September 2017, a survey showed on Tuesday.
The Emirates NBD Egypt Purchasing Managers’ Index (PMI) for the non-oil private sector weakened to 48.2 in February from 48.5 in January, significantly below 2018’s average of 49.5 and still under the 50 mark that separates growth from contraction.
Activity has contracted for six consecutive months, and January’s contraction was the steepest in 17 months. A sub-index for output fell to its lowest since September 2017, at 46.7 in February versus 47.5 a month before.
“Troublingly for future readings, new orders also looked fairly weak, falling at the fastest pace since June 2017,” said Daniel Richards, MENA economist at Emirates NBD.
“This is reinforced by the fact that export orders fell at an even more rapid pace than total new orders, with the weakest reading since October 2016, just prior to the removal of the pound’s peg to the dollar the following month.”
Companies pointed to weak sales, poor weather conditions and a lack of cash liquidity.
But despite the challenging market conditions, overall sentiment rose to a 10-month high, with 44 percent of businesses saying they expected conditions to improve over the next year.
“The interest rate cut enacted by the central bank on February 14 -– the first since March last year -– should help stimulate some private sector demand, which has lagged public investment in driving Egypt’s growth recovery over the past two years,” Richards said.
Egypt has been implementing tough economic reforms as part of a three-year $12 billion programme agreed with the IMF in November 2016, including the introduction of a value-added tax, cuts to energy subsidies and a steep currency devaluation.