Egypt Business Gauge Hits Highest Since 2021 After Devaluation

(Bloomberg) -- A key index of activity in Egypt’s non-oil economy climbed to its highest level in almost three years, finally approaching growth territory as inflation cooled and foreign currency became more available after a steep devaluation.

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The Purchasing Managers’ Index compiled by S&P Global, which measures the performance of the private sector, rose to 49.6 in May from 47.4 the month before. Though still below the 50 mark that separates expansion from decline, it’s at the highest since August 2021, according to a report published Tuesday.

May’s figure is “the first indication that the rapid cooling of price pressures is starting to boost the Egyptian non-oil private sector,” said David Owen, senior economist at S&P Global Market Intelligence. “The index signaled only a marginal decline in operating conditions.”

The reading confirms an economic turnaround is taking hold in Egypt after authorities in March let the pound fall around 40% in a bid to resolve a grinding two-year crisis and chronic foreign-exchange shortage. The move, made possible by a massive investment accord with the United Arab Emirates, helped the North African nation reach new financing deals with the International Monetary Fund and others.

Annual inflation has continued to slow from a record high since the currency’s fall, belying fears the long-awaited step would fuel another surge in consumer prices.

Input costs for businesses increased last month at their lowest pace since March 2021 and purchase-price inflation was at its weakest in four years, S&P Global said. New export orders, meanwhile, climbed for the second time in three months, reflecting rising overseas demand.

The data “signals a promising outlook for Egyptian businesses” that are “projecting an improvement in economic conditions,” Owen said.

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