Egypt Aims For 31% Industrial GDP Contribution By 2027

January 27, 2025

 

The link between industry and sustained economic growth goes back to the First Industrial Revolution in the 1780s. “Industry has always been a cornerstone of economic prosperity [and] a key driver of productivity and innovation,” a paper from the EU Commission said.

Throughout 2024, the Egyptian government talked up the importance of industrial development to revive the country’s economy. “The state [is] keen on exerting all efforts to stimulate the various industrial sectors with the view of localizing industries, particularly in developing specialized technological industries,” Prime Minister Mostafa Madbouly said at a December press event.

According to government officials, the plan is to increase the industrial sector’s contribution to national output from between 17% and 18% in fiscal year FY 2023/2024 to 31% in FY 2026/2027. 

The private sector will play a significant role. “Currently, there are strong [moves] from [Egypt’s] political leadership and the government to enhance the private sector’s contribution to production and increase the industrial sector,” Ahmed El Zayat, CEO of Engineering Management Systems, a UAE-based general contractor, told Ahram Online in September. “Expectations [are] that 2025 will be very positive for industry.”

A manufacturing boom should mean lower prices and increasing consumption as more products become increasingly affordable, boosting Egypt’s GDP. However, the state needs to ensure its strategy is effective against a backdrop of restricted imports, rising global energy prices, and the need for structural reforms to lower the national budget deficit.

Building local industry

The government’s strategy to revive industry comes amid the worst foreign currency crunch in Egypt’s history — the exchange rate has been recording unprecedented weakness against the dollar since 2021. Meanwhile, the country’s import bill is nearly twice that of exports. Semi-finished goods and raw material imports, which manufacturers need, account for 31.5% of total imports, according to the Central Bank.

To cut the outflow of foreign currency, the government wants to replace imported finished and semi-finished goods with locally made alternatives. The Ministry of Industry and Transport announced in December it plans to localize 23 high-priority industries as part of a broader strategy to enhance industrial development and reduce reliance on imports.

Those sectors include consumer products like tires, infant food, water pump motors and generators. Feeder industries include solar and energy components, water desalination and treatment systems, soda ash and automotive glass. “These industries represent a significant portion of Egypt’s imports, offering substantial opportunities for localization to strengthen the economy, create jobs, and improve trade balance,” SIS reported.

The government will “offer incentives and streamline investment procedures for stakeholders,” the state information services (SIS) portal said. In August, Minister of Industry and Transport Kamel el-Wasir announced that as an “exceptional measure,” the government “will not ask for any property tax from anyone building a factory.”  

Several Egypt-based industrialists told state-owned Ahram English they “hope this measure becomes permanent, as property tax is usually applied to residential areas, not to … industrial, agricultural or even automotive” facilities.

Another decision from el-Wasir would “prevent the closure of any industrial facility without a decision from the minister.” He also said the General Authority for Industrial Development would lead a cross-agency committee to organize factory inspection visits.

Lastly, the government announced in November that manufacturers could secure loans at 15% interest (versus the Central Bank’s overnight 27.25% rate) if the money goes toward buying equipment and production supplies. “With the launch of [that] initiative … many factories are expected to be encouraged to obtain financing and expand production,” El Zayat stressed. 

Ultimately, the government aims to “establish a self-sufficient industrial ecosystem that utilizes Egypt’s natural resources, supports the creation of new factories and bolsters local production to meet domestic and international demand,” el-Wasir told the media.

Forced opportunities?

Just as the government announced incentives, it has been aggressive with some import-heavy sectors. In October, the Ministry of Investment and Foreign Trade announced it would reduce the number of imported cars allowed from 10,000 units a month in 2024 to 8,000 in 2025. That move will invariably raise prices and complicate businesses that prioritize selling foreign-made vehicles.

Meanwhile, mobile phone imports have been nearly wiped out. In November, state-owned Ahram Online reported the official mobile phone import bill dropped “a staggering 99.9%” in the first half of 2024 due to the government’s clampdown the previous two years.

That fueled informal imports to satisfy unmet demand. CAPMAS reported overall mobile phone imports increased 6.4% in the first seven months of 2024 compared to 2023. That prompted the eight local mobile phone producers to “issue complaints to the government over not being able to compete due to both [higher demand for] imports and issues related to smuggling,” news aggregator Enterprise said. 

Addressing the smuggling concern, the government announced in November that starting in 2025, mobile phones won’t work inside Egypt if individuals or companies — other than the locally registered dealership — import them and don’t pay 37.5% of their devices’ price in customs and taxes. 

Power to GDP

Supplying enough affordable natural gas and other fuels to new factories and expansions is essential for realizing the government’s local manufacturing ambitions. 

An S&P Global report in October said “Egyptian [liquid natural gas] LNG Q1 2025 procurement could tighten [the] European LNG market [as the country] will definitely look to buy more cargoes.” 

That would invariably cause global energy prices to increase significantly throughout the year versus 2024. Further fueling that rise will be the premium Egypt pays to secure those LNG shipments. “The supply impact is still uncertain, given the premiums Egypt is paying for cargoes,” S&P Global said. “Europe may see strong bidding activity to remain competitive globally versus Egypt, Latin America and Asia over the full course of winter.”

Geopolitics also plays a role in LNG supply and, therefore, prices. “Israel is exporting 8 million cu m/d [cubic meters a day] of gas to Jordan and 30 million to Egypt,” Alija Bajramovic, senior research analyst for European and Russian LNG at Commodity Insights, told S&P Global. “Any disruption in Israeli production/exports would disrupt spot LNG markets without doubt.”

To reduce its dependence on imported fuel, the Egyptian government has been “working on alternatives that might help to diversify the country’s energy” suppliers,” noted research from the Tahrir Institute for Middle East Policy published in February. 

Part of that is increasing drilling for oil and gas. In September, the government awarded four exploration blocks to ENI, BP, Qatar Energy, and Zarubezhneft. It also is running exploration bids in 23 blocks with a submission deadline set for February 2025. 

The state also is investing in renewable power stations to supply the national electricity grid. According to Solar Quarter, a specialized news portal, the government has attracted $4.4 billion in investments to build renewable energy stations to generate 10,000 megawatts in 2025. The state’s long-term plan is to raise renewables’ contribution to the national grid from the current 20% to 42% by 2030 and 60% by 2040. 

Ultimately, despite the government’s best efforts to create an ideal business environment for local and foreign manufacturers, realizing ambitious long-term manufacturing plans relies on how regional geopolitical threats develop in 2025. The World Bank stressed, “The uncertainty of the conflicts looms large over … investments, heightening investors’ apprehension.”