Egypt's non-oil private sector slightly improved in June compared to May. The pace of decline slowed from May, reaching 49.2 in June, up from 48.2 the previous month, according to Emirates NBD-Egypt purchasing managers' index (PMI). However, Egypt's non-oil private sector remained under pressure, as Egypt's PMI is still below the 50 mark, which delineates contraction and expansion in the non-oil private sector. According to the PMI, the average of 49.4 over the second quarter (Q2) of 2019 was the strongest since Q3 last year, and was noticeably better than the long-run series average of 48.4. Moreover, the PMI index showed that both output and new orders–which together account for a little over half of the index's weighting saw substantial improvements in June–although they are still in contradictory territory, it was still higher than May. The report explained that output came in at 49.0 in June, stronger than May's reading of 47.9, while new orders rose to 48.6 in June from 47.8 a month earlier. "Only 11% of respondents saw output decline, while 10% increased output. New export orders seemed to weigh down domestic activity, with very few firms registering an uptick in demand," Richards said, according to the PMI`s report. It also explained that the strengthening in the Egyptian pound over the past several months to levels last seen in March 2019 could potentially pose a challenge to export-oriented businesses. Notably, the Egyptian pound has strengthened nearly 7% against the United States dollar since the beginning of the year. "In a positive for firms' margins, output prices stayed flat in June, following two months of cuts, while the pace of growth in input prices slowed to the second-slowest in the eight-year series – the slowest was recorded earlier this year, in March," according to the PMI. Unfortunately, the employment index was negative for the second month in a row, on back of the firms which seem to be looking to cut costs elsewhere. In terms of the future output index, the PMI stated that it remained strongly positive, albeit less so than in May. The report explained further that around a quarter of respondents anticipate an improvement in activity over the next 12 months, compared to just 3% expecting a deterioration. "This chimes with our outlook for Egypt, where we expect a modest acceleration in GDP growth this year," the PMI assured. Minister of Finance, Mohamed Moeit, announced in April that Egypt aims to achieve a growth of 6% in the current fiscal year (FY), and to also reduce the overall deficit rate to 7% by the end of current FY. Moeit added that Egypt is currently completing the economic reform programme, implemented since 2016, to overcome numerous difficulties until the national economy is on track. Notably, Egypt has been implementing economic reforms in order to get the $12bn loan agreed with the International Monetary Fund (IMF) in November 2016. These reforms include the introduction of the value added tax, cuts in energy subsides, and the pound flotation.
