Business slump deepens as PMI hits 31-month low

Business conditions deteriorated for the sixth month in a row in March, according a survey of Egypt’s non-oil private sector.

The Purchasing Managers' Index scored dropped from 48.1 in February to 44.5 in March, the lowest score since August 2013. Any score below 50 indicates that conditions for businesses got worse during the month.

The decline was due to lower output, a lack of new work and subdued demand, due to currency shortages and the devaluation of the Egyptian pound, businesses reported. Purchasing activity also fell at the sharpest rate since 2013, leading to the steepest decline in pre-production inventories since the 2012 launch of the Egypt survey.

Total costs increased due to the devaluation of the Egyptian pound against the US dollar, while job shedding accelerated amid reports that workers had left their posts in search of better opportunities.

In a press statement, Jean-Paul Pigat, senior economist at survey-sponsor Emirates NBD attributed some of the bleak outlook to timing. “The deterioration in business conditions is not entirely surprising as the survey took place at a time of elevated uncertainty that coincided with the devaluation of the EGP.”

Striking an optimistic note, Pigat said while the recent devaluation of the pound has caused short-term pain, it could lead to improved economic conditions in the future. “Looking ahead, we believe that the move to a more competitive exchange rate has now reduced a key source of risk, and could therefore set the stage for a broader economic recovery in the second half of 2016,” he said.