Emirates National Bank of Dubai (NBD)-Egypt stated that the Egyptian economy is moving towards stability after reaching its lowest level during the last quarter of 2016.

The bank said in its PMI report, which was issued on Wednesday, that the business conditions of non-oil private sector companies in Egypt continued to deteriorate for the ninth month in a row during April, but also announcing that it was slower than over the past months.

According to Tim Fox, head of research and chief economist at Emirates NBD, the slow pace of decline in the main PMI index in Egypt during April is considered an encouraging start for the second quarter (Q2) of the year, especially because it comes after a gradual improvement during the first quarter. It reinforces the perception that after bottoming out in Q4 2016, the economic situation in Egypt is beginning to stabilise.

In addition to recording the highest level in nine months, the rise in the index of export demand growth for the first time in nearly two years is also a positive factor and may reflect the positive impact of the weak exchange rate.

The main PMI index of Egypt’s rose to the highest level in nine months, recording 47.4 points in April, up from 45.9 points recorded in March.

The report pointed out that Egypt’s non-oil private sector declined at a marked, but slower, pace. High prices and currency instability continued to weigh on domestic market demand for Egyptian goods and services.

On the other side, the size of new exports increased for the first time, ending a 21-month period of deflation. The companies involved in the study linked this increase to the opportunities arising from new export markets. In response to the decline in production requirements, companies reduced the number of employees, although the rate of job losses fell to its lowest point in 19 months, according to the report.

According to the report, the decline in production inputs pushed the company to reduce the number of its employees, although the job cut rate has fallen significantly in the last 19 months. Fox added that the decline in the volume of new business prompted the companies to reduce the production inputs; therefore, the inventory of purchases decreased again in April.

The report continued that the devaluation of the Egyptian pound against the US dollar and the increase in market prices were the main factors behind the growing inflation. It pointed out that despite the decline in production inputs’ prices in the last 14 months, they remained generally sharp.

According to the report, the companies that increased the prices of their products, have passed the increase in production costs to customers.

The NBD’s main PMI index of Egypt is based on the data collected from monthly responses to questionnaires sent to purchases executives in more than 450 private sector companies. Those companies have been carefully selected to represent the true structure of Egyptian non-oil producing economy, including manufacturing, services, construction, and retail.