Standard & Poor’s reported on Monday that operating conditions deteriorated in Egypt’s non-oil private sector in December, with production and new orders declining at the fastest rate in eight months amid rising cost pressures.
Standard & Poor’s Global’s headline PMI for Egypt fell to 48.1 points in December from 49.2 points in November, marking a contraction for the fourth month in a row. A reading of less than 50 points indicates a decline in activity.
Reasons for the decline
This decline is due to weak customer demand and increased inflationary pressures, which were exacerbated by the weakness of the Egyptian pound against the dollar.
“The latest Egypt PMI data showed that the expected recovery of the non-oil private sector is unlikely to be without hiccups in 2025,” said David Owen, chief economist at Standard & Poor’s Global Market Intelligence.
He added that companies faced rising prices and falling demand, which led to the fastest decline in operating conditions since last April.
Employment levels declined for the second month in a row, although the decline was slight, and rising payroll costs, linked to cost of living challenges, contributed to the decline in job numbers.
Input cost inflation accelerated, driven by rising material prices and an increase in the value of the dollar. Despite this, companies were less inclined to raise their prices, so they reduced profit margins to maintain orders.
Non-oil companies were more optimistic about future activity, hoping for improved domestic and geopolitical conditions in 2025.
Future production
The future production sub-index rose to 53.8 from 50.5 in November, however, concerns about exchange rate fluctuations and price instability may dampen demand in the near term.
The International Monetary Fund is pushing towards empowering the Egyptian private sector in the local economy through the economic program implemented by the Egyptian government, under which it borrows $8 billion, of which it obtained 3 tranches.
Egyptian Finance Minister Ahmed Kojak said yesterday that Egypt will receive a tranche of $1.2 billion from the International Monetary Fund this month.
