Egypt’s non-oil private sector economy had its worst performance in two years as demand slumped after a sharp spike in prices and the pound’s devaluation while businesses struggled to secure the necessary supplies of raw materials.

S&P Global Egypt Purchasing Managers’ Index (PMI) dropped to 45.2 in June from 47.0 in May. June is the 19th consecutive month to record a decline.

“The Egyptian non-oil economy saw its weakest performance in exactly two years in June, as businesses saw demand slump in the face of sharply rising prices, a devalued pound, and material shortfalls,” said S&P.

Weaker sales were more prominently seen in the manufacturing, wholesale and retail sectors, with a strong decline, also recorded in services.

Core inflation increased to 13.5 percent in June from 13.1 percent in May.

The sub-index for production prices increased to 72.0 in June from 62.1 in May, while the purchasing cost index rose to 70.9 from 62.3.

David Owen, Economist at S&P Global Market Intelligence, said that supply conditions also “remained weak and added to inflationary pressures, as firms signaled that raw material supplies were becoming increasingly difficult to secure.”

Two of the most significant components of the PMI, the Output and New Orders Indices, both declined to their lowest levels since the second quarter of 2020 in June, registering marked contractions in both activity and sales.

The production index fell to 41.3 from 45 in May, while the new orders index fell to 41.9 from 44.6.

The sub-index for future production expectations rose to 63.7, the highest level in five months, compared to 55.2 in May, when it approached the lowest level since this category was included in the survey ten years ago.

Egypt targets real GDP growth of 5.5 percent in the 22/23 fiscal year, which began on July 1.

Egypt’s economy grew 6.2 percent in the fiscal year 21/22, announced the Minister of Planning and Economic Development Hala al-Saeed.

The budget deficit dropped to 6.1 percent of GDP in the 21/22 fiscal year, down from 6.8 percent in the previous fiscal year.

Egypt achieved a primary surplus of 1.3 percent of GDP at $5.14 billion, and debt service costs fell to 32.8 percent of the public budget, compared to 35.8 percent in the 20/21 fiscal year.

The revenue growth rate reached 20 percent, while the expenses growth rate was about 15 percent.

Egypt’s fiscal year begins on July 1 and ends on June 30.