Business activity in Egypt shrank for the 10th consecutive month in July as output, new orders and employment all declined, although the speed of contraction slowed, a survey showed Wednesday.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector was 48.9 points in July, an improvement from June’s 47.5 points but still below the 50 point mark that separates growth from contraction.
Egypt has been struggling to revive its economy since a popular uprising in 2011 and subsequent political upheaval that has driven away investors and tourists, depriving it of the foreign currency it needs to import raw materials.
“Although the PMI is still pointing to weakness in Egypt’s private sector, some consolation can be found in July’s report as the pace of contraction is starting to ease,” said Jean-Paul Pigat, senior economist at Emirates NBD. “Addressing the FX liquidity shortage will be key to seeing a further stabilisation in the PMI in the second half of the year.”
The survey showed output in the non-oil private sector also continued to fall for a 10th month but at a slower rate, reaching 48.8 points in July from 46 points in June.
“There were some reports of an improvement in underlying demand, but these were outnumbered by mentions of liquidity shortages, higher costs and subdued customer turnout,” Markit, which compiled the data, said in a report.
The new orders sub-index also fell at a slower pace in July. It reached its highest since September, at 49.1 compared with 46.1 points in June.
New export orders fell sharply however, in July, to 45 points in July from 45.9 points in the previous month, the fastest pace of decline in three months.
Egypt has been wrestling with a currency crisis that economists blame on an overvalued pound. The central bank devalued the pound to 8.78 per dollar from 7.73 in March and has said it will pursue a more flexible exchange rate.
The employment sub-index came in at 45.7 points from June’s 46.8, signalling another drop in monthly payroll numbers – the 14th in a row – is likely in July.
President Abdel Fattah al-Sisi has pledged to reduce the jobless rate to 10 per cent over the next five years. It stood at 12.7 per cent in the first quarter of 2016, according to official figures, but analysts believe it is much higher.
Economic growth slowed to 4.5 per cent in the first half of financial year 2015-16, from 5.5 per cent a year before, which experts say is too slow for a population that has expanded by 1 million to 91 million in the past six months.