Business activity in Egypt shrank for the 11th consecutive month in August as data for output, new orders, and employment deteriorated, with purchase prices rising sharply amid a hard currency shortage, a survey on Monday found.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector was 47 points, down from July’s 48.9 points and well 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, hitting inflows of the foreign currency it needs to import raw materials.
“The August PMI figures underscore the urgency to initiate a wide-ranging economic reform program,” said Jean-Paul Pigat, senior economist at Emirates NBD.
Employment fell at the sharpest rate since the data series began in April 2011.
“A number of respondents signalled that workers had left voluntarily in order to search for better job opportunities,” the report said.
Egypt’s unemployment rate stood at 12.5 per cent in the second quarter, state statistics agency Capmas said last month, and youth joblessness is at critical levels.
The International Monetary Fund (IMF) last month reached a staff-level agreement on a US$12 billion lending programme as part reforms to cut Egypt’s budget deficit and rebalance currency markets. Parliament last week approved a value-added tax under that plan.
Output declined at the fastest rate since April on subdued demand, difficulties in obtaining raw materials and high prices, the survey found.
Managers reported a “record rise in purchase prices” as the Egyptian pound has weakened against the dollar.
“The survey data highlights the ongoing need to move to a more flexible exchange rate system in order to achieve a market-clearing rate for the EGP (pound),” said Mr Pigat.
Egypt has been wrestling with a currency crisis that economists blame on an over-valued pound, which the central bank has kept steady at 8.78 to the dollar despite saying last March it would pursue a more flexible exchange rate.
On the black market, the only source of dollars for many Egyptian businesses, the pound has steadily weakened. Last week dealers cited it at 12.70-12.75.
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