Egyptian economy experiences ‘sharp fall’ from Ukraine war

A number one credit standing company stated in the present day that the Russian-Ukrainian struggle is hurting Egypt’s non-oil sector. 

The New York-based S&P International launched a report on Egypt’s Buying Managers’ Index. The index consists of surveys of businesspeople. A rating above 50 signifies financial growth, whereas one under 50 exhibits contraction. S&P International is likely one of the “Large Three” credit standing businesses. 

S&P International gave Egypt a rating of 46.5 for March, down from 48.1 in February. It was the sharpest decline since June 2020. 

The Russian invasion of Ukraine, which started in February, led to “sharp decreases in output and new orders” amongst non-oil Egyptian firms. Inflation additionally hit power, meals and uncooked supplies producers on account of world issues about provides ensuing from the struggle, in keeping with the company.

“The non-oil economic system was clearly hit by the results of the Russia-Ukraine struggle throughout March, with companies typically seeing purchasers pull new orders again amid elevated costs and financial uncertainty,” stated S&P International economist David Owen, per the report. “Output ranges adopted go well with with the sharpest fall since June 2020 throughout the first world COVID-19 lockdown.”

Owen added that the results hit the manufacturing and building sectors significantly, as they had been “extra tremendously uncovered to power and materials worth rises because of the struggle.” Meals costs additionally skilled a “sharp enhance.” 

The economist additionally criticized the Egyptian authorities’s resolution to devalue the pound by 14% final month. “Whereas the 14% devaluation of the Egyptian pound on 21 March might present some quick time period assist for the economic system, it’ll additionally possible speed up value pressures,” Owen stated. “Some companies have already seen an increase in import costs, which may constrain output and drive a larger enhance in promoting prices.”

Why it issues:  The report is an additional indication of the struggle in Ukraine’s results on the Egyptian economic system. Maybe most placing is the wheat scenario. Egypt is likely one of the largest wheat importers on the earth and will get 80% of its imports of the grain from Russia and Ukraine. Egypt is now looking for imports from different international locations similar to India and ramping up home manufacturing. 

The Suez Canal additionally lately raised toll charges to assist the struggling economic system and Egypt is trying to enhance pure fuel exports to Europe in response to the struggle. Russia gives Europe with round 40% of its fuel. 

The information just isn’t all dangerous. Egypt managed to extend its cotton manufacturing in February. 

What’s subsequent:  Cairo continues to be planning further measures to assist mitigate the Russia-Ukraine struggle’s results. Yesterday, the federal government introduced extra financing for native wheat manufacturing. Egypt’s wheat harvest season will finish subsequent month.