Egypt’s non-oil private sector saw a significant downturn in March, entering a contraction phase for the first time in 2025. According to the latest Purchasing Managers’ Index (PMI) report from S&P Global, the PMI dropped to 49.2 from 50.1 in February, falling below the 50.0 threshold that indicates the boundary between growth and contraction.
Key Drivers of the Decline
The contraction was largely driven by a noticeable decline in new orders, both domestically and internationally. This weakened demand prompted businesses to scale back on production, reduce their purchasing activities, and cut back on staffing levels. The reduction in output and purchasing activities reflects a broader slowdown in the economy, as firms adjust to lower demand.
Despite the contraction, the decline was relatively mild, with the PMI remaining above historical averages for similar downturns, suggesting that while the economy is facing challenges, it is not in a severe recession.
One of the few positives amid the slowdown was the moderation in input costs. The rise in input prices was the slowest in nearly five years, a trend attributed in part to the stabilization of the Egyptian pound against the US dollar. This has provided some relief to businesses, which had been grappling with higher costs in the past months.
David Owen, Senior Economist at S&P Global Market Intelligence, highlighted that this improvement in inflation could offer some encouragement to firms, as it suggests less pressure on their cost structures moving forward.
Not all sectors were affected equally. The construction sector emerged as a strong performer, showing robust growth in both output and new work. This contrasts with the declines experienced in other sectors, particularly manufacturing and wholesale & retail. While the overall sentiment is one of caution, the construction industry’s strength offers a glimmer of optimism in an otherwise challenging landscape.
Employment Trends and Future Outlook
Employment levels saw a slight dip, though most businesses maintained stable payrolls, indicating that firms are cautious but not yet making significant layoffs. Looking ahead, however, the outlook for non-oil firms is far from optimistic. Expectations for future output are at one of the lowest levels in the survey’s history, with only 2% of firms reporting a positive outlook. This subdued sentiment reflects the uncertainties surrounding both the domestic economic environment and global trade dynamics, leaving firms cautious about their future prospects.
The latest PMI data paints a picture of an economy at a crossroads. While the contraction in March is a concern, the mild nature of the downturn and the stabilization of inflation offer some hope for a gradual recovery. However, the subdued optimism among firms and the uncertainties in global trade dynamics suggest that Egypt’s non-oil private sector may face continued challenges in the coming months.
