Business activity was more or less unfazed by bigger IMF package, wave of reforms in March: Egypt’s non-oil private sector activity saw a “softer but still-solid deterioration” in March due to persistent currency challenges and elevated inflationary pressures, according to S&PGlobal’s Egypt Purchasing Managers’ Index (pdf).

Forty months in contraction: The index inched up to 47.6 in March, up from 47.1 in February, marking the fortieth consecutive month that Egypt’s PMI sat below the 50.0 threshold that separates growth from contraction.

We had reason to believe things would turn around in March: We had hoped that the end of the FX shortage, death of the parallel market, and clearing of port backlogs — all stemming from the float of the EGP — may put the private sector on a new trajectory. Over the past couple of weeks Egypt also secured an expanded IMF package, a USD 35 bn investment from the Gulf and funds from the EU and the World Bank — some of these funds have started trickling in and some are due over the coming weeks and months.

S&P was also hopeful the wave of reforms would bear fruit: “It was also hoped that the central bank's intervention in early-March, consisting of an emergency 600 basis points interest rate hike and the floating of the [EGP], would start to reverse the damage,” S&P Senior Economist David Owen wrote. And although survey data show that inflation has slowed to a three-month low, “firms are still lacking confidence that activity will grow over the year ahead, suggesting that economic risks may take more time to disappear,” Owen added.

Businesses have less faith in the economy: Sentiment towards future activity fell to its “weakest level recorded in the series history” on the back of concerns that “economic conditions will remain depressed and bring sales down further.” Although, firms have remained positive about the coming 12 months.

New order volumes and business activity dropped “markedly” as elevated inflationary pressures, FX challenges, and price uncertainty continued to lead to a drop in client spending.

Red Sea shipping disruptions remained a problem: Shipping issues contributed to material shortages causing a decline in vendor performance.

On the bright side: New export orders rose for the first time since December 2022 thanks to stronger foreign demand. Businesses also raised their staffing for the first time in 2024, which helped to offset a reduction in February and ease the levels of backlogged work for the first time since June.

ELSEWHERE IN THE REGION: Saudi Arabia and the UAE remained in expansion albeit at a softer pace, amid supply constraints and Red Sea shipping disruption. We dove into the details of the two countries’ non-oil business performance for March in Wednesday’s Enterprise Logistics.

News received attention from Reuters.

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