Business activity in Egypt shrank for the third month in a row in May, a poll showed on Tuesday, in a sign the economy remains fragile as former army chief Abdel Fattah al-Sisi is set to become the country’s next president.
Egypt’s economy has been hit by more than three years of political and economic turmoil after the 2011 uprising against veteran autocrat Hosni Mubarak.
The government is walking a fine line in an attempt to boost revenues and cut a high deficit at the same time as luring investors into the country.
The HSBC Egypt Purchasing Managers Index (PMI) for the non-oil private sector stood at 48.7 points in May, down from 49.5 in April.
Readings above 50 indicate expansion, while those below 50 point to contraction. The index had been below 50 for 13 months through October.
“It’s another disappointing number and contains no signs that the economy is starting to recover – output is weak, new orders are falling and employment is contracting,” said Simon Williams, Chief Economist for the Middle East at HSBC.
“This is the eighteenth time in the past 20 months that the PMI has printed below 50 – a protracted and deep slump in activity that underscores the scale of the challenges the new regime faces as it seeks to revive the country’s economic fortunes.”
Economic plans announced so far have not spelled out many details of how Sisi intends to boost growth.
Egypt’s economy is set to grow only about 2 percent this fiscal year through to end-June, with a budget deficit of around 11-12 percent of gross domestic product forecast for this and the next fiscal year.
The PMI survey of around 350 private-sector firms showed output contracting for the second time since January, with the related subindex falling to 47.5 points in May from 49.8 a month earlier.
The subindex for new orders edged further into contraction territory at 48.5 points, down from 49.3 points in April.
New export orders fell at a slower rate, with the subindex at 47 points compared with April’s 46.5 points.
Egypt’s central bank had allowed the Egyptian pound to weaken against the dollar in May, narrowing the gap between official and black market rates at a time when businesses want clarity on the direction of the currency.
Businesses cut staff in May at a faster pace than in April. Output prices fell with that subindex at 49.3 points after stagnating in April. Input prices rose again, squeezing company margins, albeit more slowly than in April.
Egypt’s annual core inflation rate, which strips out subsidised goods and volatile items including fruit and vegetables, slowed to 9.11 percent in April from 9.9 percent in March, the central bank said last month.