Business contracting at fastest rate since 2013, employment falls steeply: Survey

Business conditions deteriorated sharply in November, dropping at the fastest pace in more than two years, according to businesses surveyed for the Egypt Purchasing Manager’s Index (PMI).

Staffing levels also fell, with job shedding reported at the fastest level since Egypt’s PMI was launched in 2012.

The overall index score dropped to 45 in November, down from 47.2 in October. Scores below 50 indicate that businesses in Egypt’s non-oil private sector feel conditions deteriorated during the month. So far in 2015, the sector has contracted in eight out of 11 months.

November’s score was the lowest since September 2013, a month when the majority of the country was under a strict curfew following the overthrow of former President Mohamed Morsi.

Companies attributed the drop in activity to the fall of the pound against the dollar and to security issues dampening global demand. As a result, businesses’ output and new orders both declined at the sharpest rate recorded in more than two years, while staff numbers dropped for the third month in a row.

These findings are echoed by reports from state statistics agency CAPMAS that unemployment increased in the third quarter of 2015 to reach 12.8 percent.

Inflation and a decline in the Egyptian pound’s purchasing power led companies to purchase less stock and materials, with input buying dropping off at the steepest rate since August 2013 and stocks of purchases falling to the lowest level since the survey began.

By contrast, the Finance Ministry announced last week an upward revision to its economic growth target for fiscal year 2015/16, which ends in June 2016. The government is now aiming for 5.5 percent GDP growth, compared to a 4.5-5 percent target announced in March.

The Finance Ministry is also aiming to reduce unemployment to 10 percent and to keep the budget deficit within 9-9.5 percent of GDP. In a November 30 press release, Finance Minister Hany Kadry Dimian said these goals are realistic and achievable.