Egyptian Non-Oil Private Sector witness upsurge during July

  • The IHS Markit’s Purchasing Manager’s Index (PMI) data provides a vital clue that the business activities have risen a second time in a row during 2019 as all the private sector companies’ output and new orders have improved significantly.
  • Driven by the private sector companies’ overall higher productivity or output standards plus greater demand for more modern laws, Egypt’s private sector business movement witnessed significant expansion during July for the first time since April, making it the second time in a row during 2019.
  • The IHS Markit’s PMI (Purchasing Manager’s Index) report ratings for Egypt’s non-oil private sector rose to 50.3 from 49.2 as recorded in June, measuring the health of the non-oil industry that moves above the 50 mark; signaling the growth in business activity.

David Owen, IHS Markit economist and author of the report also stated that “A very prominent factor was a surge in contracts from foreign clients, leading to the first rise in new export orders since August 2018.” He also added that “The surge in demand came from several countries, signaling that Egyptian businesses are growing in their competitiveness based on trade.”

The International Monetary Fund has approved a $2 billion (Dh7.34bn) tranche, the last installment of a three-year $12bn loan to Egypt that supported the Arab nation in the revival of its economy through robust, stringent measures.

Egypt debased its currency and cut subsidies at the end of 2016 to induce loan agreement, followed by additional rounds of paying cuts. The reforms helped finish a severe dollar shortage, repaired the burdened finances and force the country out of depression, though Egyptians have felt the burden of these stringent measures.

Improvement in output and new orders, that account for half the index’s coefficient, accounted for the pick-up privately sector growth throughout July month.

Companies boosted output within the wake of additional new orders at the beginning of the third quarter, though the increase in demand was marginal, the report aforesaid. Egyptian corporations attributed stronger sales to new export contracts as well as an overall increase in market activity.

New business from abroad rose for the first time since August 2018 and at the sharpest pace for over 18 months. The demand primarily came from markets within the Middle East, Africa, and Europe with the clients creating additional orders for brand new work.

Inflation in July rose the foremost in nine months, primarily thanks to a surge in fuel charges once the government cut subsidies, that led the corporations to extend the value of products and services, the report stated.

The impact of the subsidies on value is probably going to be temporary as a result of the IMF-led reforms are nearing their finish, with the speed of inflation expected to come to the comparatively low levels seen within the half the year, Mr. Owen stated.

Egyptian corporations command an optimistic outlook on the state of the economy for the rest of the year. “Optimism toward future output growth improved in July,” Mr. Owen stated.

“Some corporations primarily based their outlook on hopes of a strengthening Egyptian pound within the near-term because the US Dollar might fall in worth through charge per unit cuts.”