Cairo -

The non-oil private sector in Egypt continued to shrink, and it fell last January at the strongest pace in 9 months since April 2021, in violation of the steady growth of the Egyptian economy since the start of the Corona pandemic.

The Egyptian government and international institutions - such as the Bank and the International Monetary Fund - expect that Egypt will achieve strong economic growth between 5.5 and 5.6%, marking the start of the economy's recovery from the effects of the Covid-19 pandemic that swept the world in March 2020, and cast a shadow on economic growth in All countries of the world.

The IHS Markit PMI data indicated a strong and accelerated deterioration in business conditions in the non-oil Egyptian economy at the beginning of the year, amid weak customer demand and inflationary pressures.

The index fell last January to 47.9 points from 49 points in the previous December, to remain below the 50 level that separates growth from contraction, recording its lowest reading since April 2021, and this reading was lower than the series average of 48.2 points;

Resulting in a strong decline in overall working conditions.

Why the downturn in the private sector?

According to the results of the index, production levels fell at the strongest pace in more than a year and a half, while the volume of new business fell more quickly than it did last December, and hiring and purchasing activity fell, as companies suffered from another sharp rise in input costs. production, however production prices rose at the weakest pace in 6 months amid efforts to maintain customer sales.

Regarding the affected sectors, the index indicated that the recent slowdown was particularly strong in construction, wholesale and retail, as recent data indicated a sharp drop in production within these categories, and the activity of the industrial and service sectors was relatively stable last month.

Economic researcher David Owen - from the IHS Market Group, which is affiliated with the Purchasing Managers Index - described the beginning of the Egyptian non-oil producing sector at the beginning of this year as “disappointing, as the decline in demand rates led to stronger declines in production and new business.” He noted that companies remained largely confident that they would weather the current economic storm and see an increase in activity over the next 12 months.

state domination

Companies in the Egyptian private sector complain about the state’s dominance over the economy, which prompted President Abdel Fattah El-Sisi to comment on what has been raised recently about government and army companies crowding out the private sector in a way that creates unfair competition between the two sectors, and said that one of the private sector companies - he did not name It obtained business worth 75 billion pounds (4.7 billion dollars), at 11 billion pounds annually during the past seven years (one dollar equals 15.75 pounds).

Al-Sisi said during the inauguration of the gasoline production complex at the Assiut Petroleum Refining Company in Assiut Governorate in Upper Egypt, at the end of last year;

"The private sector is a key partner in development and has a pivotal role, and we seek to increase it," noting that he appreciates what is said in this regard, as well as the goodwill of its owners.

At the time, observers saw that Sisi's speech was an indirect official response to the statements of the Egyptian billionaire and businessman Naguib Sawiris, which he made earlier to a foreign newspaper and sparked great controversy, as he spoke about the inability of the private sector to compete with state companies and the army that owns Most projects.

The state is compensating for the downturn

Commenting on the discrepancy between the decline in the performance of the private sector and the increase in the growth of the Egyptian economy, Dr. Umniah Helmy, former Vice Dean of the Faculty of Economics and Political Science at Cairo University for Graduate Studies and Research, said that “the recent data of the International Monetary Fund and the World Bank confirm that the Egyptian economy will grow at rates greater than expected. What confirms that it is going positively, and these data are related to the macro economy, and it is not necessary that the private sector proceed at the same pace.”

She explained in her speech to Al Jazeera Net that the decline in the performance of the private sector can be compensated by growth in the government and family sectors, and the decline in the performance of the private sector is due to the decline in sales and production as a result of the reluctance to purchase, the increase in raw material prices, the increase in the cost of production and the decline in the productivity of workers;

caused by the repercussions of the Corona pandemic and its new strains, all of which are influencing negative factors.

The credit for the overall economic growth and its overcoming of the private sector crisis - according to Umniah Helmy - is due to the large government spending and the injection of tens of billions of investments in various sectors of the Egyptian economy, especially the infrastructure. private.

government optimism

At the macroeconomic level, there appears to be a more optimistic view, as the World Bank raised its forecast for the growth of the Egyptian economy to reach 5.5% during the current fiscal year 2021-2022, and attributed this to several reasons, including the rise in exports, the growth of the natural gas sector, the increase in tourism revenues and the adoption of projects great nationalism.

The International Monetary Fund recently raised its estimates of the growth of the Egyptian economy to 5.6%, exceeding the recent estimates of the World Bank by 0.1%, and thus Egypt becomes the only country among oil importing countries that achieves positive growth.

Egyptian Finance Minister Mohamed Maait expected economic growth to exceed these figures, and said, "There are expectations that the economic growth rate will exceed all these announced estimates to record 5.7%, which reflects the solidity and cohesion of the Egyptian economy and its ability to recover from the repercussions of the Corona pandemic, and contain external shocks."

During the semi-annual report on economic and financial performance, the minister expressed his optimism about the Egyptian economy recording positive growth rates that exceed the government's goals, and the estimates of international financing and classification institutions during the current fiscal year, noting that development projects contributed to moving the wheel of the national economy, and diversifying the national economy. growth structure.

Weak customer demand and inflationary pressures led to the continued contraction of the private sector in Egypt (Al Jazeera Net)

The state versus the private sector

Economics professor Abdul Nabi Abdul Muttalib believes that despite the high inflation in the world, the International Monetary Fund and the World Bank expect strong growth rates that we have not heard about for a long time, and therefore subtracting the inflation rate from growth gives us the size of real growth in any country.

The annual inflation rate in Egypt accelerated to 6.5% last December, up from 6.2% in November, according to data from the Central Agency for Public Mobilization and Statistics (government).

Abdul Muttalib added to Al Jazeera Net that the construction sector - which is one of the most important components of private sector activity - was affected as a result of the decision to ban construction and the enactment of new legislation regulating construction and building operations;

Consequently, the suspension of this sector led to a decline in one of the indicators of the growth of the private sector, while the dominance of the Egyptian state over the contracting market in large sums led to the growth of the overall Egyptian economy.

The economic expert considered that the period in which the size of the private sector will appear is after the opening of the administrative capital and the start of daily activity in it, as the features of the relationship of state companies with the Egyptian economy will become clear;

Will it continue to dominate and dominate, or will it give way more to the private sector?

He pointed out that the continued contraction of this sector affects employment and the total income available for spending, as the purchasing power of citizens declines.

Egyptian Prime Minister Mostafa Madbouly announced that Egyptian exports during 2021 achieved the highest return in their history, recording $45.2 billion, with an increase of 90% since the start of the economic reform program.

Madbouly attributed the significant increase to the rise in the volume of non-oil exports, which amounted to $32.34 billion, recording a growth of 30% compared to 2020, and petroleum exports, which reached $12.9 billion, recording a growth rate of 90% compared to 2020.