Dollar Woes, Inflation Batter Egyptian Firms’ Hopes for 2023

Activity in Egypt’s non-oil economy contracted for a 27th month, with businesses seeing little prospect that high inflation and foreign-currency shortages will ease this year, a survey showed.

(Bloomberg) —

Activity in Egypt’s non-oil economy contracted for a 27th month, with businesses seeing little prospect that high inflation and foreign-currency shortages will ease this year, a survey showed.

The Purchasing Managers’ Index compiled by S&P Global, which measures the performance of the private sector, rose to 46.9 in February from 45.5 the month before, yet remained well below the 50 mark that separates growth from decline.

Companies’ output kept contracting, albeit at a slower pace, as they reported weakening demand and soaring prices, according to the report. Export sales fell for a second consecutive month, with companies signaling that “a weak foreign economic climate had suppressed sales.”

After hitting a four-and-a-half-year high in January, purchase-price inflation eased to its lowest since October. That gave “some relief after a rocky start to the year,” said David Owen, senior economist at S&P Global Market Intelligence.

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However, firms cut jobs at the fastest rate in nine months, and business confidence fell back toward October’s record-low. Just 5% of survey respondents predict a rise in input, amid expectations “severe” inflation that neared an annual 26% in January will continue. 

Egypt has devalued the pound three times in the past year in an attempt to tackle a foreign-currency crunch spurred in part by the shockwaves of Russia’s invasion of Ukraine.

The country’s net international reserves edged up slightly in February to $34.35 billion from $34.22 billion a month earlier, the central bank said Sunday.

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“Continued demand weakness, persistent inflation and ongoing import controls to restrict FX flows mean that companies are likely to face a prolonged downturn in 2023,” Owen said.

–With assistance from Tarek El-Tablawy.

(Update with foreign reserves figure in seventh paragraph)

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