A survey showed a contraction in the non-oil private sector in Egypt during last October, for the 35th month in a row, amid continuing inflation, disruption of supply chains, and a shortage of foreign currency for commercial activities.
The Standard & Poor’s Global Purchasing Managers’ Index fell to 47.9 points last month, compared to 48.7 points last September, falling below the 50-point level that separates growth from contraction.
David Owen, an economist at Standard & Poor’s, said, “The Egyptian Purchasing Managers’ Index indicated a sharp deterioration in conditions for non-oil activities for five months.”
He added, “A faster decline was recorded in the volumes of new commercial activities, and a sustained weakness in production with the continued impact of supply shortages and inflation, which prompted prominent companies to make the first reductions in their staff and inventory levels since last July.”
Egypt is facing an economic crisis amid record inflation and a severe shortage of foreign currency, and the rise in borrowing over the past eight years has made repaying foreign debt an increasingly burdensome burden.
Monetary authorities have devalued the pound three times since early 2022, as the local currency lost nearly half of its value against the dollar.
Cairo imposed restrictions on imports in light of the shortage of foreign currencies, while at least two banks suspended the use of debit cards in pounds (the local currency) outside the country to stop the bleeding of currencies.
Standard & Poor’s Global said: “Survey participants highlighted the continued impediments to demand resulting from high prices, a weak currency and supply problems.”
On the other hand, the sub-index for production rose to 46.4 from 45.7 last September, while the sub-index for future production expectations rose to 56.4, its highest level in 10 months after recording 53 last September.
The day before yesterday, Friday, Fitch lowered Egypt’s long-term credit rating in foreign currencies to “B-“, down from “B”, indicating increased risks to external financing.
The agency reported that the downgrade reflects increased risks to Egypt’s external financing, macroeconomic stability, and the trajectory of already high government debt.
Last October, the international rating agency Standard & Poor’s lowered Egypt’s long-term sovereign rating from “B” to “B-“, indicating increasing financing pressures on the country.
Also last month, Moody’s lowered Egypt’s credit rating from “B3” to “Caa1” and attributed this to the deterioration of the country’s ability to bear debt.
2023-11-05 08:14:40
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