Egypt non-oil business activity slows for ninth straight month

Business activity in Egypt shrank for the ninth straight month in June on the back of further declines in output, new orders, and employment, a survey showed on Sunday.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector recorded 47.5 points in June, marginally lower than the 47.6 points posted in May and below the 50-point mark that separates growth from contraction.

Egypt has been struggling to revive its economy since a popular uprising in 2011 and subsequent political upheaval that has driven away investors and tourists, depriving it of the foreign currency it needs to import raw materials.

Managers surveyed in June pointed to the crash of EgyptAir flight MS804 in May as adding additional strain on the country's ailing tourism sector and further reducing new business from abroad.

"June's survey suggests the Egyptian economy continued to slow at the end of 2015/16, with the tourism sector appearing particularly weak," said Jean-Paul Pigat, Senior Economist at Emirates NBD.

Egypt's financial year runs from the start of July to the end of June.

"As we start the new fiscal year in July, hopes for a stronger recovery will depend in large part on whether a solution to the ongoing FX liquidity crunch can be found in the near term," Pigat added.

Dollar Shortage

Egypt has been wrestling with a crippling dollar shortage that economists blame on an overvalued pound. The central bank devalued the pound to 8.85 per dollar from 7.73 in March and announced that it would pursue a more flexible exchange rate.

It later firmed up the pound to 8.78 per dollar. Economists say the currency is still overvalued, with the black market rate hovering at a little more than EGP11 per dollar.

A report by Markit, which compiled the data, said that respondents noted sharply rising raw material costs stemming from currency weakness against the US dollar.