Egypt’s non-oil private sector saw solid growth in January, marking its first expansion since August 2024, driven by a strong rise in output and sales volumes, according to the S&P Global Egypt Purchasing Managers’ Index (PMI) report published on February 4.
Non-oil private sector
Egypt’s PMI climbed to 50.7 in January, its highest level in 50 months, up from 48.1 in December. A reading above 50 signals growth, while a figure below 50 indicates contraction.
“The ceasefire deal between Israel and Hamas likely added confidence to markets in January. That said, business expectations for the next 12 months remain subdued, showing that firms are still uncertain about economic stability over the longer term,” said David Owen, Senior Economist at S&P Global Market Intelligence.
Owen added that the report’s findings suggest inflation is expected to continue its downward trend in the coming months. The report indicated that four out of five index components showed positive results in January, although employment remained unchanged.
The output sub-index increased to 51.1 in January, up from 47.1 in the previous month, while the new orders index rose to 51.3 from 46.4. Employment levels stabilized following two months of job cuts, though hiring remained limited.
In contrast, the services sector saw lower sales, though rising customer demand prompted firms to expand output. Increased input buying led to higher inventories, supported by stable supply chains.
Despite improved conditions in January, businesses became more cautious about future growth, with their outlook for the months ahead turning notably more pessimistic, reaching a historically low point compared to December.
Inflation slows
Cost pressures eased to an eight-month low, with input prices rising at a slower pace. Consequently, firms raised output prices only marginally, marking the smallest increase in four and a half years.
Total business activity and new orders rose modestly in January, marking the fastest growth in four years. This uptick was driven by improving economic conditions and easing inflationary pressures, encouraging customers to place new orders, particularly in the manufacturing, construction, and wholesale & retail sectors.
Egypt’s annual inflation rate eased to 23.4% in December, down from 25% a month earlier, mainly due to a decline in food and beverage prices.
The inflation rate in Egypt soared in 2022 after Russia invaded Ukraine, which prompted foreign investors to withdraw billions of dollars from Egyptian Treasury markets. It reached a record high of 38% in September 2023, marking a sharp hike from 21.3% in December 2022.
Egypt’s economic growth
Egypt’s economy grew by 3.5% in the first quarter of the fiscal year 2024-25, up from 2.7% during the same period last year. This growth was driven by government reforms and a rebound in key sectors, particularly manufacturing.
Looking ahead, the economy is expected to grow by 4% in the fiscal year ending in June, supported by continued backing from the International Monetary Fund (IMF) in improving the country’s economic framework, as reported in a January Reuters poll. This aligns with the GDP growth projection of 4% set by Egypt’s Ministry of Planning.
