Egypt’s Private Sector Slumps as Currency Crisis Deepens

Egypt’s non-oil private sector experienced a continued downturn in December, according to the latest S&P Global purchasing Managers’ Index (PMI).The decline, the fourth consecutive month of contraction, is largely attributed to the Egyptian pound‘s weakening against the dollar, fueling soaring costs and dampening demand.

The PMI fell to 48.1 in December, down from 49.2 in November. A reading below 50 indicates contraction.This marks the sharpest decline in eight months, reflecting a significant weakening in both production and new orders.

“Companies reported rising costs and declining demand, leading to the worst deterioration in operating conditions since last April,” stated David Owen, senior economist at S&P global Market Intelligence. He added a note of caution, suggesting that the anticipated private sector recovery in 2025 could be jeopardized by the pound’s continued fall against the dollar, notably if it breaches the 50 mark.

Deteriorating Business Conditions

the S&P Global PMI, a key indicator of Egypt’s non-oil private sector health, assesses economic activity based on five factors: production levels, new orders (domestic and foreign), employment changes, inventory levels, and supplier delivery times. The December report paints a concerning picture.

The decline in production is directly linked to a significant drop in new orders – the lowest in eight months. Faced with economic headwinds and rising prices, companies are absorbing cost increases by reducing profit margins rather than passing them on to consumers, according to Owen. This strategy, while protecting consumers in the short term, negatively impacts businesses’ financial performance.

The construction and wholesale/retail trade sectors were particularly hard hit. Though, the services sector showed relative resilience. the increased cost pressures have also led to a rise in inflation, with material costs reaching a three-month high. In response, many companies are reducing inventory levels to minimize purchasing costs.

Key Findings from the December PMI Report

• Production levels fell to their lowest point since May, with sales growth proving elusive.
• Total inventory decreased for the frist time in six months, as companies focused on reducing existing stock rather than replenishing supplies.
• Input purchases increased in both the manufacturing and services sectors.
• Business confidence showed a slight improvement compared to november, fueled by hopes for better economic and geopolitical conditions in 2025.
• Employment declined for the second consecutive month due to rapidly rising payroll costs.

This data comes as the Egyptian pound weakened further against the dollar on Monday, trading at 50.66 for buying and 50.77 for selling in most Egyptian banks. The ongoing currency crisis continues to cast a long shadow over the egyptian economy.

The implications of this economic downturn extend beyond Egypt’s borders, potentially impacting global trade and investment. The situation underscores the challenges faced by emerging economies navigating volatile global markets and currency fluctuations.

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Egypt’s Economic Woes Deepen as Private Sector Contracts

Egypt’s private sector continues to struggle amid a deepening economic crisis, with the latest data indicating a fourth consecutive month of contraction. This downturn is largely attributed to the ongoing weakening of the Egyptian pound against the US dollar, leading to soaring costs for businesses and a decline in consumer demand



Senior Editor, World Today News: Welcome, Dr. Nadia Khalil. You are an economist specializing in the North African region. We appreciate you joining us today to discuss this concerning development in Egypt’s economy.





Dr.nadia Khalil: Thank you for having me. The situation in Egypt is indeed quite precarious. The latest PMI reading paints a grim picture of the challenges facing the private sector.



Senior Editor: Can you elaborate on the key factors contributing to this economic downturn?



Dr.Nadia Khalil: Several factors are at play. Primarily, the continuous depreciation of the Egyptian pound against the dollar is fueling inflation and eroding purchasing power. This makes imported goods more expensive, impacting both businesses and consumers.



Senior Editor: The S&P Global PMI report highlighted a sharp decline in both production and new orders. What’s driving this trend?



Dr. Nadia Khalil: businesses are reporting a meaningful drop in demand, both domestically and internationally. Rising costs are forcing companies to absorb the burden rather than passing them on to consumers. This strategy, while aimed at cushioning the impact on consumers in the short term, ultimately squeezes profit margins and impacts business sustainability.



Senior Editor: Are there any sectors that are proving more resilient than others?



Dr. Nadia Khalil: The services sector has shown somewhat greater resilience compared to construction and wholesale/retail trade, which have been particularly hard hit.



Senior Editor: The report mentions a slight increase in business confidence. Is this optimism justified given the current economic headwinds?



Dr. nadia Khalil: While there might be a glimmer of hope for 2025. This optimism is tentative at best and depends heavily on whether the Egyptian government can implement effective measures to stabilize the currency and manage inflation.



Senior Editor: What are some of the potential ramifications of this economic downturn for Egypt and the wider region?



Dr. Nadia Khalil: If left unaddressed, this downturn could have far-reaching consequences. It could impact foreign investment, lead to further job losses, and increase social unrest.The situation also has implications for regional stability, as Egypt is a key player in the North African and Middle Eastern economies.







Senior Editor: Dr. Khalil, thank you for providing your insightful analysis of this complex situation.



Dr. Nadia Khalil: My pleasure. I hope that the Egyptian government and international partners can work together to find solutions to address these pressing economic challenges.