Egypt’s non-oil private sector dips lower

Current IMF's measures include slashing energy subsidies, devaluating the Egyptian pound and imposing new taxes. Egyptians could soon demonstrate as they did in 2012 (photo). © Gigi Ibrahim

Non-oil private sector activity in Egypt has dipped modestly in October 2018 and have touched their lowest levels, showed a survey.

According to the Emirates NBD Egypt Purchasing Managers’ Index (PMI) the said sector has weakened to 48.6 in October down from 48.7 a month earlier. Incidentally the PMI’s 50 mark separates growth from contraction.

Earlier this year, while the PMI for the non-oil private sector registered growth in July and August, it suffered a contraction in September.

According to Daniel Richards, a MENA economist at Emirates NBD, the data “suggests that private sector firms remain under pressure as Egypt’s IMF-sponsored economic reform program continues. That being said, the reading is still far higher than those seen at the start of the process in November 2016, and future expectations remain robust.”

Ever since the commence of the International Monetary Fund’s reform program, the non-oil private sector has had an average reading of 47.9. With the sector witnessing a decline in output for the second consecutive month can be attributed to lower demand for goods and services due to challenging market conditions.

Companies across Egypt all witnessed a decrease in export orders in October and this was at a pace that is much slower in September. This again can be attributed to challenging economic conditions in international markets.

Incidentally, Egypt’s financial year runs from July to June, and not April to March. As part of the three-year $12 billion IMF-driven reform package, Egypt is in the process of implementing a series of challenging and tough economic reforms that is aimed at weaning itself off its revenues from the oil sector. Economists and investors are thus following the PMI of the non-oil private sector.

Measures included in the IMF’s financial package includes, slashing energy subsidies, devaluating the Egyptian pound and imposing new taxes.

These measures are aimed at drawing back investors who had fled during the 2011 uprising.