Non-oil business activity in Egypt decelerates in August

According to media reports, business activity in Egypt fell for the eleventh month in a row in August. Figures for output, new orders and employment worsened and purchasing prices posted steep increases due to a hard currency shortage, according to a survey.

Data from the Emirates NBD shows that Egypt’s Purchasing Managers Index (PMI) for the non-oil private sector was 47, lower than July’s 48.9 reading and lower than the level of 50 which separates growth from contraction.

Meanwhile, employment posted the steepest decline since April 2011. Egypt’s official statistics agency CAPMAS stated that the unemployment rate in the second quarter was at 12.5% with critical levels for youth unemployment.

Last month, the International Monetary Fund (IMF) reached an agreement on a $12 billion lending programme as part of reforms to cut Egypt’s budget deficit and balance currency markets again. Survey results show that output showed the biggest decline since April due to frail demand, firming prices and issues on finding raw materials.

A "record rise in purchase prices" was reported by managers since the Egyptian pound depreciated against the US dollar. Economists commented that survey data underlines the continuous need to move to a more flexible exchange rate system in order to reach a market-clearing rate for the EGP.