A leading financial services firm released a negative assessment of the Egyptian economy on Tuesday following President Abdel Fattah al-Sisi’s confirmation that he will seek a third term in office.
S&P Global Market Intelligence reported that Egypt’s Purchasing Managers’ Index (PMI) was 48.7 in September — a four-month low and 0.5 point drop from the 49.2 score in August, according to a Tuesday report.
The PMI is a measure of economic trends in the manufacturing and service sectors. A score above 50 indicates economic expansion, while a score below 50 shows contraction.
S&P Global economist David Owen said that Egyptian non-oil companies experienced a “record pileup of incomplete orders” in September due to high inflation and a “lack of raw material supply.” These factors, along with the weak exchange rate between the Egyptian pound and the US dollar, “added to a generally subdued level of confidence toward future activity as well as another sharp reduction in purchasing levels,” he said in the report.
Egypt has been reeling from high inflation for more than a year. The current crisis began with the Russian invasion of Ukraine in early 2022. Egypt, which depends on Russia and Ukraine for wheat imports, was especially affected by the global supply chain shocks resulting from the war. Annual inflation hit a record 39.7% in August.
The Egyptian Central Bank raised interest rates in August to combat inflation but left them unchanged in September.
Egypt also agreed to a flexible exchange rate between its currency and the US dollar in October of last year in order to unlock a $3 billion deal with the International Monetary Fund, leading to a drop in the value of the pound. The currency traded at around 19 pounds to the dollar a year ago but is currently at more than 30 pounds, according to market data.
S&P Global’s bearish outlook on Egypt is mirrored by other institutions, such as US investment bank Morgan Stanley, which transitioned Egypt’s sovereign credit stance from “neutral” to “dislike” on Monday. Morgan Stanley expressed concerns that the Egyptian government’s reform initiatives, including the implementation of a flexible exchange rate, would face complexities due to the looming presidential election, as reported by Bloomberg.
Why it matters: The Egyptian presidential election will take place in December. As expected, Sisi confirmed on Monday that he will run for a third term. Sisi came to power in a 2013 coup against the democratically elected Mohammed Morsi — a member of the Muslim Brotherhood who was elected following the Arab Spring protests.
Sisi’s reign has been marked by widespread allegations of human rights abuses. Morsi was imprisoned in 2013 and died in court while on trial in 2019.
Now, opposition groups are alleging foul play with regard to the upcoming vote. Candidates need 25,000 signatures to run in the election. The rival campaign of opposition politician and former parliament member Ahmed al-Tantawi said that citizens are being impeded when registering their support for his candidacy, Reuters reported on Monday.
There is a degree of popular anger against Sisi amid the crackdown on the opposition and the poor economic situation. On Monday night, protesters tore down and desecrated Sisi election banners in the coastal city of Marsa Matrouh, according to reports. The Egyptian Interior Ministry said it made arrests in the city, but it claimed the perpetrators were fighting over visiting Libyan poets.
Sisi addressed the economic problems in a rambling speech on Saturday, saying it is better for Egyptians to “go hungry” than impede national progress.
“If the price of the nation’s progress and prosperity is to go hungry and thirsty, then let us not eat or drink,” he said, according to a video published by Middle East Eye.
Sisi also suggested in the speech that students donate blood to earn money, according to video clips on social media.
Know more: The Biden administration is facing increasing pressure from some Democrats in Congress to cut military aid to Egypt. On Friday, Rep. Gregory Meeks, the top Democrat on the House Foreign Affairs Committee, placed an informal hold on $235 million in military aid that the administration recently approved.
The hold came in response to the charges against Democratic Sen. Bob Menendez, who was indicted in regard to an alleged corruption scheme involving Egypt.
Source : Al-Monitor