Recent data from S&P Global revealed that Egypt’s non-oil private sector continued to contract in December 2024, with production and new orders declining at the fastest rate in eight months. The Purchasing Managers’ Index (PMI) fell to 48.1 points from 49.2 points in November, marking the fourth consecutive month of contraction.
Reasons for the Decline:
This decline is attributed to weak customer demand and rising inflationary pressures, exacerbated by the depreciation of the Egyptian pound against the US dollar. David Owen, Chief Economist at S&P Global Market Intelligence, stated: “The data shows that the expected recovery of the non-oil private sector is unlikely to be smooth in 2025.”
Impact of Inflation and Rising Costs:
Companies faced rising prices and declining demand, leading to the sharpest deterioration in operating conditions since April 2024. Employment levels also fell for the second consecutive month, albeit slightly, due to increased salary costs linked to rising living expenses.
Input Cost Inflation:
Input cost inflation accelerated, driven by higher material prices and the rising value of the US dollar. However, companies were less inclined to raise their selling prices, opting instead to reduce profit margins to maintain orders.
Optimism for the Future:
Despite the challenges, non-oil firms expressed optimism about future activity, anticipating improvements in local and geopolitical conditions in 2025. The Future Output Index rose to 53.8 points from 50.5 points in November.
IMF Support:
The International Monetary Fund (IMF) is pushing to empower Egypt’s private sector as part of the economic program implemented by the Egyptian government. Egypt has received three tranches out of an 8billionloanandisexpectedtoreceivea1.2 billion tranche this month.