Egypt’s GDP growth rate slowed to 2.4% in the fourth quarter of fiscal year (FY) 2023/24, bringing the annual growth rate to 2.4%, down from 3.8% in the previous year. The slowdown was attributed to a combination of factors includingongoing geopolitical tensions, global economic uncertainty, and the government’s contractionary policies aimed at restoring macroeconomic stability.
“Despite these challenges, an improvement in economic activity is anticipated as the government implements prudent macroeconomic measures and strengthens public investment governance,” said the Ministry of Planning, Economic Development, and International Cooperation in its quarterly economic update.
The ministry highlighted the importance of creating space for private sector participation and ensuring efficient resource allocation to key sectors. This will be further supported by the ongoing implementation of structural reforms, underpinned by three key pillars: building macroeconomic resilience and stability, enhancing the competitiveness of the economy and improving the business environment, and supporting the green transition.
Several key sectors experienced negative growth during the fiscal year. The Suez Canal saw a sharp decline in activity, recording a 68% drop in the last quarter alone and a 30% overall decline for the year. This was attributed to risks associated with threats to international shipping routes in the Red Sea, leading shipping companies to divert their routes away from the Canal.
The extraction sector also saw a 4.7% decline due to reduced oil and gas production. This was driven by a decline in foreign investments in new well discoveries and a slowdown in the development of existing wells. However, the ministry noted that this trend has been reversed following the gradual payment to foreign oil and gas companies over the past few months. These developments are prompting greater investments in energy efficiency and renewable energy projects, accelerating the green transition and providing opportunities for private sector investments.
Despite the decline in these key sectors, positive growth was seen in other areas, partially offsetting the slowdown in economic activity. These included communications and information technology, tourism (reflected in restaurants and hotels), wholesale and retail trade, transport and storage, and social services such as education and health.
The non-petroleum manufacturing sector, which contributes around 11.4% to GDP, contracted by 5.2% over the year due to shortages in raw materials. However, this was addressed through economic reform policies implemented in March 2024, leading the sector to record positive growth of 4.7% in the fourth quarter of the year, marking the first increase since Q1 2022/23. This improvement was due to the growth of several industries, such as ready-made garments (54.2%), textiles (23.8%), and computers and electronic products (14.9%).
High-frequency data also signal tentative signs of improvement in economic activity. The Purchasing Managers’ Index (PMI) rose to 50.4 points in August 2024, marking an improvement for several months and surpassing the neutral threshold for the first time since November 2020, primarily driven by expansions in manufacturing activities. Additionally, the Business Barometer Index, issued by the Egyptian Center for Economic Studies, experienced a slight improvement, reflecting a positive trend in overall business performance.
These developments suggest a gradual stabilization of the economy as key sectors show signs of renewed activity. These indicators align with forecasts from various international institutions, suggesting that GDP will grow by 4% in the current fiscal year 2024/2025. This positive outlook is expected due to ongoing efforts to foster private sector-led growth while adopting measures to refine monetary and fiscal policies to better support economic recovery.
The government’s continued implementation of structural reforms, focused on building macroeconomic resilience and stability, enhancing competitiveness, and supporting the green transition, will also play a crucial role in driving this growth. Strengthened public governance will also create space for private investments, while continued fiscal consolidation is expected to enable further investments in human capital and industrial development, enhancing productivity — a key factor for sustainable economic growth and development.
