CAIRO: Business activity in Egypt grew for a second consecutive month in December, a survey showed yesterday, in a positive sign that the economy may be starting to pick up despite continued violence on the streets.
The government’s decision to push ahead with plans for a referendum this month to vote on a new constitution ahead of presidential and parliamentary elections has raised hopes for more stability, although continued unrest poses a risk to the economic outloook.
In the survey, the HSBC Egypt Purchasing Managers Index (PMI) for the non-oil private sector rose to 52 points in December, marginally down from 52.5 points in November, but above the 50 point mark that indicates growth in activity. The index had been below 50 for 13 months through October.
“This second consecutive plus-50 reading marks a positive end to a very difficult year,” Liz Martins, economist at HSBC, said. “We expect to see the index remaining above 50, and hopefully starting to push higher over 2014, as Egypt begins to recover some of the ground it has lost over the last three years.”
Ratings agency Fitch raised its outlook on Egypt’s B-minus credit rating on Friday to stable from negative, saying financial assistance from Gulf states had eased pressure on the country’s foreign reserves, exchange rate and its budget, and had boosted business confidence.
The Egyptian economy, which has been unstable since a popular uprising ousted autocrat Hosni Mubarak in 2011, is benefiting from more than $12bn in aid from Saudi Arabia, Kuwait and the UAE.
The PMI survey of around 350 private sector firms showed a record rise in output, pushing the output sub-index up to 54.7 points in December from 54.0 in November.
The index of new orders rose to 54.0 points, down only slightly from 54.7 the previous month. New export orders increased for the second month in a row, and at the quickest pace in over a year and a half, the survey showed.
Businesses cut staff at a faster rate last month, with the employment index slipping to 48.7 points from 49 points in November. The index of output prices rose to 50 from 49.5 points in November.
Egypt’s urban consumer price inflation jumped to 13 percent in November, its highest annual rate in nearly four years and adding pressure on cash-strapped households.
Meanwhile, the Egyptian pound inched higher at a forex auction on Monday and dipped on the black market. The central bank sold $38.6 million to banks with a cut-off price of 6.9476 pounds to the dollar, allowing the pound to strengthen from 6.9478 at the previous sale on Thursday. It had offered to sell up to $40m. On the black market, a trader said the dollar was offered at 7.32 to the pound yesterday. Thursday’s rate was 7.30.
Reuters
