Snapshot

Although the January 25 Revolution only lasted 18 days, there is still plenty of uncertainty for Egypt’s businesses two months down the road. Although Business Today did not publish a Barometer section in March, we were able to compile March statistics for comparison to April’s wave. And the results are not promising in the short term.
Instead of a year to build and grow in the wake of the global economic slowdown, 2011 heralds its own economic roller coaster that will continue to change as Egypt’s political future unfolds. That’s without factoring in the growing unrest across the region that has spread far and wide from its humble beginnings in Tunisia.
With analysts scrambling to predict the outcome on Egypt’s economy, the nation’s businessmen and women are playing things close to the chest, hoping for the best but expecting the worst for the economy in the next three months.
But there is a more positive outlook in the next two years, which could be the remnants of the revolution and the country’s newfound sense of patriotism. Businesses believe now could be the time to grow, resulting in new contracts, new hires and new product launches.
But their optimism will likely take a turn for the worse as Egyptians deal with the fallout of the stock exchange’s opening, which occurred after respondents were surveyed.

The Insider

Almost every sector reported a significant fall in sales this month. The worst off seem to be small and medium businesses — more than half say they saw a major decrease in sales. The service industry was also hit. Some 43% said their sales had dropped slightly, compared to 44% of respondents last month.
Most blame the drop on low sales volumes and the ongoing economic turmoil. In terms of expected sales, medium-sized companies are the most optimistic in their outlook, with small and large enterprises offering more cautious predictions. That being said, all have high hopes for their businesses in the next three months, despite uncertainty regarding the parliamentary and presidential elections beckoning. Overall, 40% of companies surveyed predict their sales will improve in the next three months. This is up from the March survey where only 30% of companies forecast an increase in sales.
When it comes to investing, most companies aren’t being aggressive. Almost half describe their investment plans as “very cautious.” But there is good news on the hiring front: 30% of companies report they are hiring new employees, with 4% adding significant numbers to their rosters. This is down slightly from March as 5% of respondents said they were hiring large numbers.
As for debt, most say they expect their debt levels to remain the same in the short term, with the majority having self-financed their projects versus applying for external funding. Around 44% of companies say they have no debt.

In the News

The January 25 Revolution is still on the minds of respondents, particularly in light of the ongoing protests, strikes and sectarian violence. Respondents said the protests were the number one news item, followed by former President Hosni Mubarak stepping down and the subsequent cabinet shuffles.
Respondents also named corruption scandals as making media waves and quality certificates for products as newsworthy events on their radars. Again, the polling closed before the EGX opened up for business. The results of those events will be tabulated in our next barometer.
 

The Forecast

It seems as though respondents predict much gloom and doom in the short term, although long-term views are positive overall. Some 42% believe the economy will worsen in the next three months, with 19% saying it will stay the same and 39% forecasting improvement. This number is up compared to March results that showed 34% of respondents predicted short-term growth, while 44% saw Egypt’s economic turmoil getting worse in the near future.

Almost all of those surveyed say the economy’s performance will be based on government policy, with another 11% saying the global economy will play an important role.

Their predictions jump substantially when looking two years ahead. Around 81% say the economy will improve, with only 16% predicting things will stay the same and the remaining 3% forecasting worsening economic conditions.

Those surveyed in March were also optimistic about Egypt’s future. Although cautious about investment and near-future prospects, 68% felt the economy would get better versus 13% who believed the opposite. Bt

 
Operationally Speaking
Percentage of firms executing new projects

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