Survey: Decline in business activity slows in December

Conditions in Egypt’s private sector continued to deteriorate in December, but the decline was less steep than in previous months, according to businesses surveyed for the Purchasing Managers’ Index.

Egypt’s overall index score for December was 48.2, with any number below 50 indicating that businesses in Egypt’s non-oil private sector noted a decline during the month.

The index score is an improvement on November, when the PMI hit a 26-month low of 45. October also showed contraction, with an index score of 47.2, after a positive score of 50.2 in September.

Overall, the average index score for the fourth quarter of 2015 was 46.8, the lowest recorded since the third quarter of 2013, a period that coincided with the overthrow of former President Mohamed Morsi and the subsequent political violence and instability.

During December, both output and new business fell for the third consecutive month, although the rate of decline eased compared to November. 

Firms also reported that new business from abroad dropped sharply due to concern about the Russian air disaster. 

Employment also decreased for the seventh month running, while cost pressures rose. Survey respondents cited the weakness of the Egyptian pound against the dollar as the main reason behind higher purchasing prices. 

Despite the decline in December, survey-sponsor Emirates NBD remains cautiously optimistic about Egypt’s economic growth in the near future.

“The recovery in the December PMI data is encouraging, and suggests that the weak November survey was at least partly due to temporary factors, impacting tourism and external demand,” said Tim Fox, chief economist at Emirates NBD in a press statement. Fox added that the bank still anticipates GDP growth of 4.2 percent in the current fiscal year.

This forecast is more optimistic than one given by the World Bank last week, which projected that Egypt’s growth will slow to 3.8 percent in the 2015/16 Fiscal Year, compared to 4.2 percent in 2014/15. Egypt’s government last month announced a fiscal year growth target of 5.5 percent.