Egyptian economic activity declines

Economic activity in Egypt decreased in October, according to a monthly economic survey.

Egypt’s PMI index, a measure of business sentiment, fell to 47.2, down from 50.2 in September. Any score below 50 indicates that the non-oil, private sector economy is shrinking.

“Problems with persistent power outages and draconian restrictions on access to foreign currency continued to weigh heavily on activity [in October],” said Jason Tuvey, an emerging markets economist at Capital Economics.

The artificially high Egyptian pound has led to shortages of foreign currency – even after a third central bank devaluation last month. That makes it harder for local businesses to buy goods from abroad, and hits private sector investment, analysts say.

But IMF growth predictions suggest that Egypt will return to its pre-revolutionary growth rate of between 4 and 5 per cent this year. Masood Ahmed, regional director for the Middle East and North Africa at the IMF, said in October that he expected Egypt’s economic outlook to brighten.

“The combination of a return of confidence, improved policies on the budgetary side to try to bring the budget deficit under control, as well as for the external financial support that Egypt has received, notably from the countries in the Gulf, have all helped now to [lead to] a turnaround in the economic performance,” Mr Ahmed said.

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