Coinciding with the decline in private sector activity, net foreign assets have declined

The Central Bank revealed that Egyptian net foreign assets fell by 169.7 billion Egyptian pounds ($9.17 billion) in March, the steepest decline since the outbreak of the Corona virus crisis in February 2020, according to Reuters.

The value of bonds fell to minus 221.3 billion pounds at the end of last March from 51.69 billion pounds in the previous month, and it was the sixth month of its decline from 186.3 billion pounds at the end of September 2021.

The outflow of foreign currency, caused in part by investor unease in the wake of Russia’s invasion of Ukraine, was among the factors that prompted the central bank to devalue the pound by 14% on March 21.

These guarantees represent banking system assets owed by non-residents minus liabilities, and the bank stated that changes in their size represent net transactions of the banking system with the foreign sector including the central bank.

Analysts said that “any move could represent changes in import and export flows, foreign portfolio outflows, repayment of foreign debt, changes in the flow of workers’ remittances, or weak tourism.”

An opinion poll on Sunday showed that the Egyptian non-oil private sector activity shrank in April, continuing the 17-month deterioration, as the Ukrainian crisis led to an increase in prices.

The S&P Global Egypt PMI improved to 46.9 compared to the March 46.5 index, but remained below the 50.0 threshold that separates growth from contraction.

The company said that while the contraction has been partially easing since March, it is still the second-fastest recession in less than two years, as companies have often announced that they are cutting spending due to higher input costs.

Global food and raw food price increases continued to cause sharp declines in output and new orders, but at a slightly slower pace, with the aggregate input prices sub-index rising from 58.3 in March to 58.6 while the purchasing costs sub-index rose from 59.1 to 58.8%.

“Cost pressures have arisen in large part due to the high prices of energy and raw materials due to the war in Ukraine,” the company said.

Several participants also commented on the recent devaluation of the Egyptian pound, and although overall income price inflation was weak, it remained above the average recorded in 2021.

The central bank allowed the pound to fall by 14 percent against the dollar on March 21, after keeping the currency practically stable for the past 18 months.

Output and new orders in April extended the months-long contraction, although the output index, at 45.3, was slightly better than March’s figure of 44.6. The new orders index improved to 45.3 from 45.1.

The sub-index for future production expectations improved to 57.7 from 52.5 in March when it was at its lowest level since it was included in the survey 10 years ago, and the April number remains the third lowest in a decade.

“The continuation of the war in Ukraine means that companies are anticipating more price and supply challenges, resulting in relatively lower expectations for business activity,” said global economist David Owen of S&P.

Source: بوابة الحرية والعدالة by

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