Business activity in Egypt shrank for the eighth straight month in May but at a lesser extent than previous three months, a survey showed.
The Emirates NBD Egypt Purchasing Managers Index (PMI) for the non-oil private sector recorded 47.6 points in May after 46.9 points in April, remaining below the 50-point mark that separates growth from contraction.
Egypt has been struggling to revive its economy since a popular uprising in 2011 and subsequent political upheaval that has driven both investors and tourists away, depriving it of the foreign currency it needs to import raw materials.
“It’s definitely encouraging to see signs that the downturn has started to ease, as tentative as those indications may be,” said Jean-Paul Pigat, senior economist at Emirates NBD.
“The survey also continues to point to fundamentally weak demand conditions across the economy, which in light of the ongoing FX shortage, is likely to persist as we head into the start of FY2016/17,” he added.
The new orders subindex improved from the previous month but remained below the crucial 50 point. It reached 46.9 points in May from 45.5 points the previous month.
“New business fell at approximately one-fifth of survey participants, with high prices linked to currency depreciation mentioned as a key contributing factor,” Markit, which compiled the data, said in a report.
The rate of decline also eased in the output subindex, which reached 46.5 points in May from 45.5 points in April.
Egypt has been wrestling with a currency crisis that economists blame on an over-valued pound. The central bank had devalued the pound to 8.85 per dollar from 7.73 in March and announced it would pursue a more flexible exchange rate.
It later firmed up the pound to 8.78 per dollar. Economists say it is still over-valued.
The survey showed declines in employment continued in May, although at the slowest pace since February, with the related subindex rising to 46.3 points in May from 45.5 points the month before.
President Abdel Fattah El-Sisi has pledged to reduce the jobless rate to 10 percent over the next five years. It stood at 12.8 percent in December, according to the government, but analysts believe it may be much higher.
The economy grew around 4.2 percent in 2014/15 and is expected to grow around 5 percent in 2015/16.