Devaluation intensifies Egypt's non-oil business slowdown in April

Egypt’s non-oil business activity declined for the seventh consecutive month in April as a continuing hard currency shortage and a weakening local currency made input materials less accessible, the Emirates NBD Egypt Purchasing Managers Index showed on Tuesday.

The results of the monthly survey of purchasing managers are the first out since the Central Bank of Egypt allowed the Egyptian pound to depreciate to its lowest in over 10 years in mid-March, and announced a more flexible exchange rate policy to address a foreign-currency crunch.

“Egypt’s private sector continues to struggle amid the FX shortage,” said Jean-Paul Pigat, senior economist at Emirates NBD, commenting on the survey’s findings.

“Although further EGP weakness will eventually help lay the foundations for an economic recovery, in the short term uncertainty over the exchange rate could see additional declines in output, and a further rise in inflationary pressures,” he said.

The PMI indicator posted 46.9 in April, up from a 31-month low of 44.5 in March but still below 50, indicating a “solid contraction” of Egypt’s non-oil private sector.

Egypt has suffered from an FX shortage as foreign currency inflows deteriorated in the years following the 2011 uprising that ousted president Hosni Mubarak, particularly after tourism revenues plummeted following the downing of a Russian airliner in Sinai last October, allegedly by the Islamic State militant group.