Egypt's Private Sector Is Hurting But More Optimistic on Future

(Bloomberg) -- Private sector business activity in Egypt slowed in February to its lowest level since September 2017, as companies struggled with liquidity and new orders continued to fall, according to an Emirates NBD-Markit survey.

The Purchasing Managers Index for the non-oil private sector fell for the sixth consecutive month, to 48.2 from 48.5 in January -- well below the 50 mark that signals a growth in business activity.

The sustained decline suggests the government must do more to grow the economy, attract foreign investment and spur business activity after its November 2016 decision to float the pound and lift currency controls.

“Egyptian firms saw new orders decline at a solid rate in February, due to weakening market conditions and falling exports,” the report said. “The decrease in total sales was the most marked for 20 months, with foreign demand dropping at the fastest rate since October 2016.”

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Companies said the drop was linked to cash-flow issues, poor weather conditions and weak sales. Businesses had been squeezed in recent months by a 16.75 percent benchmark rate that the central bank had kept steady for almost a year amid concerns about inflation.

But the bank cut rates by 100 basis points during its last meeting in February -- a reduction that could help stimulate bank lending. And changes in tax policy and declining yields on local bonds could spur a new focus on private sector growth.

Despite the drops, “businesses were upbeat towards the outlook for output in February,” the report said. “Overall sentiment rose to a 10-month high, with 44 percent of firms expecting conditions to improve in the coming 12 months.”

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