The report said that this reading is the lowest the index has gotten for the local non-oil private sector in 21 months.
“The Egyptian non-oil economy suffered a strong decline in business conditions in March, as an amplifying of inflationary pressures on energy, food, and raw materials amid the Russian-Ukrainian conflict led to sharp decreases in output and new orders. At the same time, firms reduced their purchases of inputs at the quickest pace in nearly two years, while employment numbers fell for the fifth month running,” the report explained.
The report also highlighted that concerns regarding inflation and demand over the coming year caused an unfavourable outlook for the sector’s activity going forward.
Furthermore, it added that some companies operating in the sector said that import costs have increased owing to the devaluation of the Egyptian pound, which also led to a rise in purchase prices at a sharp pace that was much quicker than February’s seven month low.
“Worries over inflation and the Russian-Ukrainian war meant that hopes of future output growth were greatly depressed in March. In fact, the outlook for activity in the year ahead fell to the lowest level since this series began in April 2012,” it said.
David Owen — an economist at S&P Global — said that Egypt’s non-oil economy was clearly hit by the implications of the Russian-Ukrainian war during March, with firms often seeing clients pull new orders back amid increased prices and economic uncertainty.
“Output levels followed suit with the sharpest fall since June 2020 during the first global COVID-19 lockdown. The downturn was clearest to see in industrial sectors such as manufacturing and construction, where businesses and clients were more greatly exposed to energy and material price rises due to the war,” Owen explained.
He added that wholesale and retail companies were also affected by a sharp increase in food prices, particularly items where Egypt is exposed to import disruption, such as wheat.
“While the 14 percent devaluation of the Egyptian pound on 21 March may provide some short-term support for the economy, it will also likely accelerate cost pressures. Some companies have already seen a rise in import prices, which could constrain output and force a greater increase in selling charges,” he said.