Updated March 5th, 2024 at 12:41 IST

Egypt's non-oil sector stumbles amid Suez Canal disruptions and currency woes

Egypt's PMI dipped to 47.1 in February from 48.1 in January, marking the 39th consecutive month of contraction, with February's reading hitting an 11-month low.

Reported by: Business Desk
Egypt Flag | Image:Pixabay
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Egyptian economy struggles: The Egyptian non-oil business sector experienced a notable setback in February, exacerbated by disruptions in the Suez Canal and ongoing currency challenges, according to the latest S&P Global Purchasing Managers' Index (PMI) survey.

Egypt's PMI dipped to 47.1 in February from 48.1 in January, marking the 39th consecutive month of contraction, with February's reading hitting an 11-month low. The decline was attributed to a variety of factors, including a decrease in Suez Canal freight following attacks on shipping in the Red Sea, exacerbating the country's long-standing foreign currency shortage.

Sales and supply challenges

New orders saw decline, registering the quickest rate of decrease since March 2023, while domestic sales were hampered by inflationary pressures and supply chain challenges. Economist David Owen from S&P Global highlighted that Egypt's non-oil economy appeared particularly affected, with the situation exacerbated by regional crises.

Inflation in Egypt showed a slight easing to 29.8 per cent annually in January, down from 33.7 per cent in December, yet still reflecting significant economic pressures. However, the government's announcement of a major investment deal with the Emirati sovereign fund ADQ in late February provided some relief, boosting international bonds and alleviating currency pressures.

Nevertheless, ongoing attacks by Houthi militants in Yemen led to shipping diversions away from the Suez Canal, increasing import costs for Egyptian firms. This disruption contributed to the most significant lengthening of supplier delivery times since June 2022, further straining businesses.

Production reduction factors

As a result of shrinking demand, companies scaled back production, with the output sub-index dropping to 44.3 in February. Survey respondents noted that shipping disruptions and weakened tourism due to the Israel-Gaza conflict also impacted activity.

Overall, the PMI survey highlights the challenges facing Egypt's non-oil business sector, with the Suez Canal disruption and broader regional crises exacerbating existing economic pressures.

(With Reuters Inputs)

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Published March 5th, 2024 at 12:41 IST