A sharp depreciation of the Egyptian currency, denominated in the pound, imposed additional pricing pressures on companies. Consequently, conditions in Egypt’s non-oil economy deteriorated drastically in January. As a result, they reduced their working hours, purchased fewer items, and quit their jobs.
The S&P Global compiles the Purchasing Managers’ Index and measures the private sector performance. It dropped to 45.5 from 47.2 in December, indicating that the economy was contracting for the 26th time in a row. That was one of the fastest declines in the series.
Purchase-cost inflation hit a four-and-a-half-year high. In the meantime, output prices climbed at their fastest pace in over six years. According to the report, some firms attributed additional supply shortages to import limits, hampering production and exacerbating existing employment delays.
What are economists’ consensus predictions?
David Owen is a senior economist at S&P Global Market Intelligence. According to him, firms have made additional decreases in purchasing and employment amid sharp declines in new orders and business activity. Import restrictions and an overall lack of US dollars kept input buying at a minimum.
The Egyptian currency fell 17% last month alone. The fact indicates that Egyptian authorities are allowing for increased exchange-rate flexibility. Especially after nearly half of its value against the US dollar has been lost since March 2022. By doing so, the North African nation secured a $3 billion International Monetary Fund agreement. The deal was all about stabilizing an economy thrown into turmoil by Russia’s invasion of Ukraine with a promise to do so.
In December, headline annual inflation reached 21.3%. Prices project to stay high for most of the year. The January figures will come out hot from the oven later this week.
According to S&P, business sentiment has reached rock bottom since April 2012, owing to increased inflation in the months ahead. While firms took steps to raise wages amid ever-growing living expenses, employment decreased for the third time in four months.
In 2022, the dollar shortage exacerbated Egypt’s economic problems significantly and caused the . Owen believes that it will continue to be a major issue this year too.