{"id":660007,"date":"2025-02-05T00:00:00","date_gmt":"2025-02-05T00:00:00","guid":{"rendered":"https:\/\/enterpriseam.com\/egypt\/2025\/02\/05\/egypts-non-oil-private-sector-kicks-off-2025-on-a-positive-note\/"},"modified":"2025-02-05T00:00:00","modified_gmt":"2025-02-05T00:00:00","slug":"egypts-non-oil-private-sector-kicks-off-2025-on-a-positive-note","status":"publish","type":"post","link":"https:\/\/enterpriseam.com\/egypt\/2025\/02\/05\/egypts-non-oil-private-sector-kicks-off-2025-on-a-positive-note\/","title":{"rendered":"Egypt\u2019s non-oil private sector kicks off 2025 on a positive note"},"content":{"rendered":"

Egypt\u2019s<\/strong> no<\/strong>n-oil <\/strong>private activity expanded at its highest rate in over four years in <\/strong>January<\/strong>, buoyed by a solid increase in output and sales volumes, according to S&P Global\u2019s latest Purchasing Managers\u2019 Index report (pdf)<\/a>. The headline reading rose to 50.7 from 48.1 in December<\/a> , <\/strong>marking the second time<\/a> the country's non-oil activity has hit the expansion territory since November 2020.<\/p>\n

(Tap or click the headline above to read this story with all of the links <\/strong>to our background as well as external sources.)<\/p>\n

An uptick in new orders and output levels drove the overall improvement<\/strong>, with the output sub-index rising to 51.1 from 47.1 in December, and the new orders sub-index rising to 51.3 from 46.4, according to Reuters<\/a>. The rise was driven by \u201can improvement in economic conditions and falling inflationary pressures,\u201d which gave participants in the survey more confidence to place new orders, particularly in the manufacturing, construction, and wholesale and retail sectors. Many firms also reported having to expand their output during the month to meet increased customer demand.<\/p>\n

\"Growth at the start of 2025 was welcome news for Egypt's non-oil private sector, <\/strong>which has struggled in recent times amid rampant inflation and the wider effects of regional instability,\u201d S&P Global senior Economist David Owen said. \u201cThe ceasefire [agreement] between Israel and Hamas likely added confidence to markets in January,\u201d he added.<\/p>\n

Input prices rose at their softest pace since May<\/strong>, which \u201chelped to soften cost pressures and fuel a pick-up in sales for only the second time in over three years,\u201d Owen said. While some respondents cited increased cost pressures driven by a stronger USD, other non-oil firms \u2014 particularly in the construction sector \u2014 saw reduced material prices during the month. This also helped drive the purchase of inputs, which contributed to a slight increase in firms\u2019 input inventories.<\/p>\n

THE MACRO PICTURE- <\/p>\n

The reading came in line with expectations for the macro economy in 2025<\/strong>, Economist Mona Bedeir told EnterpriseAM, noting that inflation, GDP growth, and real sector performance were projected to see a gradual recovery this year. Bedier cited stabilizing inflation rates, the benefits of a stable FX market, and improved local supply chains in the wake of an easing of regional and global tensions. Overall growth rates are also set to benefit from an uptick in momentum in the manufacturing and construction sectors.<\/p>\n

We might not be out of the woods yet, think some analysts<\/strong>, including HC Securities\u2019 Heba Mounir, who told EnterpriseAM that \u201cWhile the first PMI reading for 2025 showed a strong bounce back, compared to December\u2019s performance and the past two years except August, a one-off expansion should not be seen as a trend until it holds on for the coming months and prove that the non-oil business activity has fully recovered after two tough years.\u201d Bedier explained that \u201cwe should wait and see if the non-oil private sector manages to stabilize in the growth territory over the next few months to make sure that the PMI readings are consistent with the macro outlook for 2025.\u201d<\/p>\n

Cautious optimism is required<\/strong>, because while the Gaza ceasefire and easing inflation readings supported January's PMI figures, lingering uncertainty over regional tension and the anticipated subsidy cuts could pose potential risks to the economy going forward, Mounir and Bedeir told us.<\/p>\n

EGP stability appears set to brighten the outlook<\/strong>, with Mounir ruling out a sharp devaluation in the local currency similar to what we saw over the past two years. \u201cThat said, a 5% fluctuation in the exchange rate as the prime minister hinted last year, will have a limited impact on private firms and consumers, which in turn would help the non-oil economy sustain its rebound.\u201d<\/p>\n

Remember: <\/strong>The EGP crossed the 50 mark against the greenback<\/a> in December and slipped even further in the first weeks of the year, but the local currency has since been on the mend having strengthened by 1.2% against the USD in January. \u201cThe issue is more about a strengthening USD than it is a weakening EGP,\u201d Al Ahly Pharos Senior Economist Esraa Ahmed told EnterpriseAM last week in reference to a runaway greenback following the election of Donald Trump in November.<\/p>\n

The survey suggests that inflation will likely continue its downward path in the coming <\/strong>months. <\/strong>Output prices at non-oil firms inched up last month at the softest pace in four and a half years, indicating that \u201cfirms are facing a lack of pressure to increase their fees in the current business environment,\u201d Owen noted. Cooling input and output price inflation supports Capital Economics\u2019 view that \u201cinflation will slow sharply at the start of this year and back to within the Central Bank of Egypt\u2019s inflation range target<\/a>, paving the way for the monetary loosening cycle to begin in the coming months,\u201d MENA economist James Swanston wrote in a note<\/a>.<\/p>\n

Remember: <\/strong>Egypt\u2019s annual headline urban inflation dropped to 24.1% in December<\/a>, down from 25.5% in November, marking the nation\u2019s lowest inflation reading since December 2022. On a monthly basis, headline inflation also calmed, falling 0.3 percentage points to 0.2%. Some analysts argue that the worst effects of subsidy cuts and price hikes that included cigarettes and other items may have passed. A favorable base effect is also expected to come into play in reducing inflation figures.<\/p>\n

Total employment in Egypt stabilized during the month<\/strong>, following two months of job cuts across the non-oil sector. However, overall hiring remained subdued, as increased hiring across some businesses was offset by reductions in others.<\/p>\n

Despite the recovery signs, overall business sentiment in Egypt is still uneasy. <\/strong>Business expectations in Egypt slipped to a historically low level in January, \u201cshowing that firms are still uncertain about economic stability over the longer term,\u201d Owen said.<\/p>\n

The international press also took note of the report: <\/strong>Reuters<\/a> | Bloomberg<\/a> <\/p>\n

ELSEWHERE IN THE REGION-<\/strong><\/p>\n