Egypt has hit the proverbial bump. The business community says it is not feeling as optimistic about the economy this month as it did in June, and July’s barometer is proof. Sales are still down for many, and while future expectations are still rosy, that future isn’t here yet and companies are responding with due caution.

 

 

Bad news about the economy in the US, and the ongoing euro zone crisis will likely only make things worse as Egypt heads toward elections that could potentially be delayed. Business Today has spoken to several experts in recent months who say investors are waiting for the inherent stability of a new government, which, if delayed, will likely result in slower economic recovery than hoped.

 

 

Some 74.3% of respondents say the economy is moving in the wrong direction, up from 65.3% last month. The news comes despite Mubarak’s ongoing investigation. Again, the vast majority blame the interim government’s policies, or lack thereof, for their current mood. (Another 25% also add that the world’s economy bears some responsibility. When asked directly, only 14.9% of respondents said government policies were actively hurting the economy. Some 54.5% said the policies had no effect, while the rest said they were benefitting Egypt as a whole.

 

 

Overall, companies are still looking to expand, while more are seemingly tired of waiting the instability out and are looking into potential investments. They are also seeing slightly better sales figures, which could improve next month’s prospects and reverse July’s gloomy trends.

 

 

M ost businesses surveyed are still reporting sales losses. Around 19% say sales over the last three months have declined heavily; another 28.7% say their sales have decreased slightly. That being said, the majority, accounting for just over 41%, say sales have stayed the same. That news is good, even though sales have declined in recent months. However, even stable figures likely represent lower year-on-year sales than usual.

 

 

But the results are still much better than last month, when around 38% of companies reported heavy sales losses, while just under 25% claimed sales had decreased slightly. June also saw 1% of companies boast strong increases in their sales.

 

 

Investment is also up. A small percentage of businesses say they are “very aggressively” investing, while 7.9% of respondents describe their investment strategies as aggressive. Still, 45.5% are still being “very cautious” as Egypt’s uncertain economic straits continue.

 

 

Those prospects improve down the road. Some 33.7% believe sales will get slightly better in the next quarter. Only 1% say sales will increase heavily, whereas a near majority predict similar results in the future. More companies are feeling the pinch, as 18.8% claim that their business activities are constrained by lack of finance. Another 6.9% say they are slightly constrained. Most blame the fact that they have to finance most projects themselves, due to new lending restrictions from a pressured banking sector.

 

 

T his month businesses are caught up in news surrounding Mubarak’s investigation, followed by the aftermath of the January 25 Revolution, which was last month’s top news story. Coming in third are the mysterious and convoluted events that unfolded in Imbaba resulting in several deaths and the burning of a Coptic church.

 

 

L ike last month, businesses are still looking to cement contracts and deals across all sectors. Around 70% of large and small companies are seeking new partners and clients, while 80% of medium-sized companies are doing the same. One-fifth of the respondents are also launching new products. Fewer are looking to hire, with large companies in the industrial sector leading the way.

 

 

Overall, around 15.8% of those surveyed are looking to make major acquisitions, up from the last few months, with the majority of the drive again coming from the industrial sector. Construction firms seem more interested in putting up cash, with 43.8% of companies looking into major new investments. Some 20% of the service industry is also making new investments, with 24% of the trade sector engaging in similar activities.

 

 

As for the economy’s long-term prospects, 76.2% say the economy is likely to grow in the next two years, versus 21.8% who say it will stay the same. The figure is down from last month when 84% said the same thing. Despite feeling less optimistic about the future, most still agree that Egypt has numerous market advantages, such as a large, inexpensive workforce, telecommunications infrastructure and strategic geographic location that will help it weather any economic storms. bt

 

 

 

Operationally Speaking

Percentage of firms executing new projects