Political unrest is hindering economic potential across North Africa. Ongoing developments in Egypt have paralysed that country’s economic activities. Tourism — a crucial sector — is receiving a significant hit, sharply declining over the past two months, normally the peak summer tourism period. Financial and energy support from Gulf Cooperation Council (GCC) countries is playing a critical role in backing the Egyptian pound. It had a relative appreciation as a result of an increase in dollar reserves to over $20 billion immediately after receiving governmental deposits from Saudi Arabia and the United Arab Emirates. Egypt’s PMI slipped to 41.7 in July, down substantially from 47.5 in the previous month. The survey signalled an acute plunge in both output and new orders, due to political uncertainty. Furthermore, the survey showed a further decline in the workforce and in purchasing activity.
The reserve bank of South Africa trimmed its 2013 GDP growth forecast last month to 2% from 2.4%. It also kept its benchmark lending rate unchanged for the 12th consecutive month at 5%, the lowest level for more than 30 years. The reserve bank has little room to use monetary policy as an economic revival tool due to increasing inflation stemming from rising fuel prices and the declining rand. Inflation increased slightly at a rate of 5.54% in June, up from 5.46% the month before. The decelerating demand for manufactured exports from Europe and strikes in the mining industry are reducing revenues in Africa’s biggest economy. To accommodate smaller revenues, the government is lowering spending for the next three years and aiming to lower this year’s fiscal deficit from around 5.2% of GDP last year to 4.6% through to March 2014. In June 2013, South Africa’s credit growth slowed from 9.1% to 8.9%. This is the second consecutive fall in borrowing growth by households and companies. It is expected that high existing personal debt will discourage consumers from applying for more credit. South Africa’s PMI improved in July to 52.2 from 51.6 the previous month, mainly as a result of new sales orders climbing in the same month.
