Egypt's decline in non-oil sector slowed in February buoyed by foreign business

The decline in non-oil business conditions has slowed, but companies have highlighted the risk of permanent closure

  
City At Waterfront During Sunset Photo Taken In Al Jizah, Egypt. Image used for illustrative purpose.

City At Waterfront During Sunset Photo Taken In Al Jizah, Egypt. Image used for illustrative purpose.

Getty Images/ Mohamed Aboelkasem / EyeEm

Egypt’s non-oil private sector weakened for the third month running in February, but the decline is slowing, and the country saw the sharpest growth in new foreign business for a decade, a survey showed on Wednesday. 

While IHS Markit’s headline Purchasing Manager’s Index (PMI) was 49.3 in February, up from 48.7 in January (50.0 and above indicates growth), the survey  said the outlook for the coming year worsened in February, although companies still expect output to pick up from current levels.

Private sector economic conditions worsened for the third month in a row in February, which companies related to the pandemic, but the rate of decline was the softest for three months and was above the long run average of 48.2, IHS Markit said.

“On the upside, the pace of contraction slowed since the start of the year, and was only modest,” the report said.

Egypt has however seen a strong upturn in export demand: “The rate of new foreign business growth was the sharpest in nearly ten years of survey data collection. Firms also reported an increase in new contracts as well as a slight improvement in tourism activity.”

Overall demand was however hampered by weak customer spending as markets remain depressed due to the pandemic.

Employment numbers continued to fall in February, but the rate of decline in jobs was the slowest for 16 months, with firms surveyed saying they had not replaced voluntary leavers. Others hired new employees due to increased workload, but backlogs reduced for the second month in a row.

Anecdotal evidence showed higher prices led by metals, particularly iron and steel, and an increase in freight charges due to rising global demand and weak container supply for shipping, the report said: “Higher costs were partially passed on to clients, although output charges rose at the softest rate in seven months and only fractionally overall.”

David Owen, economist at IHS Markit, said the latest decline had cancelled out the small rebound in conditions seen from September to November 2020, but he highlighted demand trends moving closer to stabilisation, and, the record increase in export sales.

He said: “Alongside business sentiment data, this gives promising signs for an expansion in output as the impact of the COVID-19 pandemic subsides, though panelist comments suggested that some businesses may fail before the economy makes a full recovery.”

(Reporting by Imogen Lillywhite; editing by Daniel Luiz)

(imogen.lillywhite@refinitiv.com)

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