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Egypt Private Sector Shrinks after Currency Devaluation

Egypt Private Sector Shrinks after Currency Devaluation

Tuesday, 6 December, 2022 - 10:15
Construction workers in an industrial area near the Suez Canal (Reuters)

Egypt's purchasing managers' index (PMI) declined significantly, from 47.7 points in October to 45.4 points last November, to record the second-lowest reading since June 2020.

The S&P Global Egypt Purchasing Managers' Index (PMI) slid to 45.4 in November from 47.7 in October, well below the 50.0 threshold that separates growth from contraction.

The index data added that Egyptian companies suffered a noticeable contraction in business conditions during November, as non-oil trade activity and demand were affected due to inflationary pressures.

The report indicated that production declined at the highest rate since May 2020, as the substantial decline in the value of the local currency led to a rise in purchase prices at the highest rate in more than four years.

S&P researcher Shreeya Patel explained that Egyptian companies faced an immediate drop in demand due to the rapid depreciation of the pound since late October.

The currency fell about 20 percent against the dollar, recording low levels during the current quarter to be the worst performer in the world after the Ghanaian Cedi, despite the 18 percent devaluation last October.

Patel added that the pound's depreciation against the dollar led to a noticeable increase in raw materials prices, which import restrictions had already exacerbated since early 2022.

According to the report, he explained that this led to a sharp acceleration in purchase price inflation, which reached its highest level in 52 months.

Despite that, employment levels rose for the fourth time in five months, as business confidence recovered slightly from October's record low.

The rise in output prices accelerated in November compared to October, with some reluctance to increase costs due to continued low sales.

Higher import costs and lower new orders prompted companies to reduce their input purchase levels at a rapid rate last month.

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