Hard currency shortage is a drag on growth in Egypt’s private sector

The Egypt purchasing managers’ index fell to 41.8 last month compared with 42 in October.

Non-oil private-sector growth in Egypt dropped in November, dragged down by a shortage of hard currency and higher costs to obtain it, according to the latest purchasing managers’ index produced by IHS Market.

It came as the central bank of Egypt floated the country’s currency early last month to tap a loan from the IMF, attracting new inflows of dollars but raising the cost for this as the local currency sank, following years of being pegged to the greenback at an artificial rate.

The Egypt purchasing managers’ index (PMI) fell to 41.8 last month compared with 42 in October, said Emirates NBD, the sponsor. The report noted that the rate of deterioration in business conditions has quickened in each of the past four months because of currency weakness.

A reading above 50 indicates that the non-oil economy is growing, while a reading below 50 suggests that it is contracting.

“The ongoing downtrend evident in November’s survey highlights that there will be no quick fixes to Egypt’s economic difficulties, even following the EGP devaluation earlier in the month,” said Jean-Paul Pigat, the senior economist at Emirates NBD.

“In this environment, it is crucial that authorities remain committed to their IMF-supported reform programme in order to anchor investor confidence.”

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