Egyptian businesses reduced output and cut jobs as they grappled with the impact of a dramatic currency devaluation that helped authorities secure an International Monetary Fund deal.
(Bloomberg) —
Egyptian businesses reduced output and cut jobs as they grappled with the impact of a dramatic currency devaluation that helped authorities secure an International Monetary Fund deal.
The Purchasing Managers’ Index compiled by S&P Global, which measures the performance of the non-oil private sector economy, inched up to 47.2 in December, from 46.4 in November. But it remained below the 50-mark that separates growth from contraction for a 25th consecutive month.
“Output and new business fell at sharp, but softer rates, with firms mainly linking the downturn in sales to inflationary pressures,” said David Owen, economist at S&P Global Market Intelligence.
While firms “passed a greater proportion of their expenses onto clients,” concerns over costs spurred them to “reduce their headcounts and deplete input inventories in December, leading to an additional rise in backlogs of work,” he said.
The Middle East’s most populous nation has been badly hit by the economic fallout from Russia’s invasion of Ukraine. Foreign reserves have been eroded and a subsequent currency crunch has left billions of dollars worth of imported goods stranded at ports.
Production in December was also limited by a sharp drop in purchasing activity, as well as weak liquidity and supply shortages due to import controls, according to the S&P Global survey.
Authorities devalued the Egyptian pound twice in 2022, with a pledge in October to adopt a flexible exchange rate policy eventually helping the country clinch a $3 billion IMF loan. A weaker currency, however, has driven inflation to a near five-year high, piling more pressure on consumers.
The country of 104 million people is also awaiting large-scale investments from Gulf Arab allies who’ve pledged billions of dollars in assistance.
Read also: Egypt Eases Import Rule That Had Stymied Market Amid FX Crunch
Egypt’s foreign reserves climbed slightly in December to $34 billion from $33.5 billion, the central bank said Tuesday.
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