A man working in a local chocolate factory. Reuters
According to the S&P Global Egypt Purchasing Managers’ Index (PMI), the non-oil private sector remained at 49.2 points in August. A PMI reading above 50 percent indicates that the sector is generally expanding; below 50 percent indicates that it is generally declining.
Private sector productivity in Egypt was worse in August compared to the month before due to higher inflation in input costs, S&P said in a report.
"The [Egyptian non-oil] sector has somewhat stabilized in recent months after a prolonged period of contraction, said David Owen, senior economist at S&P Global Market Intelligence.
"However, a pick-up in inflationary pressures was also indicated by the August survey findings, with some firms noting that a faster increase in input costs had reduced overall activity. Comments from surveyed companies suggest that exchange rate problems and cost of living pressures will need to be fully addressed before the country can escape the detrimental effects of inflation which currently runs at a record high," Owen noted.
To tackle the surge in inflation since Russia's invasion of Ukraine, the Egyptian government raised the minimum wage for state and private-sector employees in March and June. The increase in state employee salaries and pensions added an additional burden of EGP 150 billion to the state treasury.
Egypt’s headline annual inflation rate kept its upturn in July 2023 to hit a new record level, jumping to 38.2 percent, up from 14.6 percent recorded in the same month of 2022.
Around 81 percent of businesses surveyed by S&P reported negative sentiment regarding the market outlook.
They cited a sharp reduction in input purchases owing to the decline in orders and the surge in prices.
Egypt seeks to tackle a critical shortage of US dollars from which it has suffered for almost a year and a half, to bridge an estimated $17 billion financing gap until 2026. The country needs more of the greenback to import essential goods for industries.
The Egyptian authorities have released $131 billion worth of imported goods through different customs ports and outlets over 21 months until the end of June 2023.