RIYADH: Egypt’s non-oil private sector saw a slight decline in business conditions in March, with the country’s Purchasing Managers’ Index easing to 49.2 from 50.1 in February, according to S&P Global. 

In Lebanon, the PMI slipped to a five-month low of 47.6, reflecting softer economic activity amid regional uncertainty and subdued tourism. 

A PMI reading above 50 indicates expansion, while a figure below that signals contraction.

The trends in Egypt and Lebanon contrast with broader regional performance, where Saudi Arabia, the UAE, and Kuwait maintained expansionary momentum in February, with PMIs of 58.4, 55, and 51.6, respectively. 

Egypt’s non-oil sector slips in March 

Weakened demand drove Egypt’s non-oil private sector into contraction territory, prompting firms to cut back on activity and purchases. 

David Owen, senior economist at S&P Global Market Intelligence, said: “The non-oil sector suffered a minor setback in March, with a decline in business conditions undermining the more expansionary tone set in the first two months of the year.” 

However, he noted that Egypt’s PMI remained above its long-run trend, suggesting businesses were still in a relatively stable position. 

The latest PMI survey indicated a significant easing of inflationary pressures, with input costs rising marginally — the slowest pace in nearly five years. 

S&P Global also noted that firms reported only a slight increase in selling prices, signaling a more stable pricing environment. 

“Firms will be particularly buoyed by the improved picture for inflation. Although headline inflation plummeted from 24 percent to 12.8 percent in February mostly due to base effects, a softening of input cost increases according to the March PMI data suggests there could be further reductions going forward,” said Owen. 

He added: “Part of this softening was linked to a weaker US dollar, which remains greatly influenced by the evolving state of US trade policy.” 

According to the report, non-oil companies in Egypt saw a drop in business activity for the first time this year, primarily due to weaker new order intakes. 

S&P Global also highlighted that both domestic and international demand remained subdued in March, prompting firms to cut operations and spending. 

Surveyed companies reported a reduction in headcounts as weak demand and limited capacity pressures dampened workforce needs. 

On a positive note, the construction sector performed well in March, with survey data showing robust growth in both output and new work. 

However, business activity in the manufacturing and wholesale and retail sectors remained subdued. 

Looking ahead, companies expressed concerns about the economic outlook, with output expectations falling to one of the lowest levels on record. 

“The outlook for the local economy is therefore somewhat unclear, which is reflected in a diminishing level of business expectations,” added Owen. 

Egypt is implementing a series of reforms under its the International Monetary Fund-backed economic program. 

In March, it secured a $1.2 billion disbursement from the IMF, bringing total funding under its economic reform program to $3.2 billion. The IMF also approved a $1.3 billion facility for climate-related reforms. 

While the country’s gross domestic product growth rebounded to 3.5 percent in early 2024-25 and inflation has eased, fiscal challenges remain. A $6 billion drop in Suez Canal receipts widened the current account deficit to 5.4 percent of GDP in 2023-24, despite spending controls helping achieve a 2.5 percent fiscal surplus. 

Lebanon’s PMI falls to five-month low 

A separate S&P Global report, published in association with BLOMINVEST Bank, revealed that Lebanon’s PMI declined to 47.6 in March, down from 50.5 in February and 50.6 in January. 

The drop was attributed to weaker output and new orders, driven by subdued tourism and ongoing regional instability. 

Surveyed companies reported that restrained client purchasing power and consumer hesitancy toward non-essential spending led to a contraction in new order intakes at the end of the first quarter. 

“The BLOM Lebanon PMI for March 2025 fell to a five-month low at 47.6, indicating a change of course in the economy toward instability,” said Ali Bolbol, chief economist and head of research at BLOMINVEST Bank. 

He added: “The spillover effects from clashes on the Syrian coast, to renewed escalation between Israel and Hezbollah, to delays in the disarming of the latter have all left their de-stabilizing imprint on the Lebanese private sector.” 

According to the report, Lebanese firms saw a decline in foreign sales, with challenging shipping conditions, high export costs, and regional instability acting as headwinds for international trade. 

S&P Global noted that the drop in new business intakes helped firms clear backlogs of work for the first time this year. 

Signs of spare capacity also prompted businesses to trim their workforce, though job cuts remained mild, affecting just 1 percent of surveyed firms. 

Regarding purchasing activity, Lebanese private sector firms exercised more caution than in February, with buying volumes largely unchanged. However, surveyed companies reported faster shipping times for newly purchased items. 

Despite the slowdown, business sentiment remained optimistic, with growth expectations reaching their highest level since the survey began in May 2013. 

“The only worthwhile news from the March PMI results is that expectations of a better outlook are still positive, though at a more subdued level,” concluded Bolbol. 

Last month, the IMF welcomed Lebanon’s request for support in tackling its economic crisis. 

After more than two years without a president, Lebanon elected a new head of state in January and formed a government led by Prime Minister Nawaf Salam. In February, the IMF signaled openness to a new loan agreement following talks with the finance minister. 

The previous caretaker administration failed to implement the reforms required for an IMF bailout to rescue the collapsed economy.