A photo showing men working in a local factory. Ahram Online
The sharp decrease in October’s reading came after a similar decline in September at 48.7 points.
The decline in October's PMI reading reflects the persistent inflationary pressures that have been negatively impacting demand across Egypt's non-oil economy, resulting in weaker activity, S&P said in a report.
The report also noted that while the fall in employment was modest, it was the fastest decline since February.
“Similarly, businesses reported a slight decrease in their inventory levels for the first time in three months, after previously building stocks amid fears of rising input prices,” S&P highlighted.
In October, the report went on, the rising material prices and currency weakness led to another sharp increase in input costs for non-oil companies.
Supply chain obstacles, higher inflation rates in input costs, and difficulties in acquiring raw materials were identified as key factors behind the price rise, S&P explained.
Egypt's annual headline inflation rate decreased to 38 percent in September, down from 39.7 percent in August, but it is still significantly higher than the 15 percent recorded in September 2022, according to data from CAPMAS.
The country’s annual core inflation rate also experienced a decline, reaching 39.7 percent in September, down from 40.4 percent in August, as reported by the Central Bank of Egypt (CBE).
David Owen, senior economist at S&P, highlighted that business volumes saw a faster decline during October due to supply problems and an inflationary wave, leading companies to reduce staffing and stock levels for the first time since July.
“Business confidence picked up in October to the highest level in the year to date, implying some optimism that output could improve over the coming 12 months," Owen said.
Moreover, expectations towards the year-ahead outlook for activity improved in October to their highest in 2023, after reaching record lows earlier this year.
“Firms were moderately hopeful of a recovery in economic conditions, with 13 percent of respondents predicting growth for the next 12 months,” the report pointed out.
Egypt faces several investment challenges that need to be addressed to promote a climate conducive to business. The main obstacles could be summarized as a complicated regulatory framework and foreign currency shortage due to geopolitical tensions, rising inflation, decline in remittances, and foreign investment.
Under its loan deal with the IMF, the cabinet announced its IPO programme to sell its stakes in 35 state-owned companies for strategic investors to collect $5 billion from October 2023 until the end of June 2024.
The 35 state-owned companies fall within sectors such as banking, insurance, construction, energy, tourism, oil, energy, and petrochemicals.
Additionally, the Egyptian government raised the minimum wage for private sector employees from EGP 3,000 to EGP 3,500 starting from 1 January 2024.
In 2022, Egypt’s non-oil exports increased by 60.8 percent to register around $35.7 billion, compared to $22.2 billion recorded in 2014, said Minister of Trade and Industry Ahmed Samir in last July.
Short link: