Egypt’s economy saw a strong recovery in the second quarter of FY 2024/2025, with Gross Domestic Product (GDP) growth reaching 4.3%, a 2% year-on-year increase, driven by ongoing government reforms focused on macroeconomic stability and effective management of public investments, according to a March 26 statement from the Ministry of Planning, Economic Development, and International Cooperation.
Non-oil sector leads growth
The positive growth was attributed to the government’s ongoing structural reforms aimed at ensuring macroeconomic stability. The growth of Egypt’s economy has been mainly fueled by key sectors, according to the statement.
Non-oil manufacturing, tourism (particularly in restaurants and hotels), communications and information technology (ICT), and trade-related transportation and storage led the expansion with a remarkable 17.7% growth in Q2 FY2024/2025, recovering from an 11.5% contraction in the same quarter last year. This rebound reflects the positive impact of structural reforms and policy changes. The tourism industry grew by 18%, showing the recovery of Egypt’s hospitality sector, while ICT grew by 10.4%, underscoring its continued importance to the economy.
On the expenditure side, net exports made a positive contribution of 1.75 percentage points to Egypt’s GDP growth for the first time since Q1 FY2023/2024, largely due to increased goods and services exports, particularly in tourism.
In February, Egypt’s S&P Purchasing Managers’ Index (PMI) stood at 50.1, a slight decrease from the 50.7 recorded in January. Despite this drop, the index remains above the crucial 50 threshold, signaling that the non-oil sector continues to experience modest growth and sustained improvement. This positive performance highlights ongoing resilience in Egypt’s economy, particularly within the non-oil industries.
“The Egypt PMI remained above the neutral 50.0 threshold in February, further confirming that the non-oil economy has started 2025 in better health. Coupled with January’s upturn, the data reflects the best opening two months of the year in the survey’s history.” stated David Owen, Senior Economist at S&P Global Market Intelligence.
Main challenges
Despite the positive growth, Egypt faced setbacks from external factors, particularly geopolitical tensions that affected the Suez Canal. The canal experienced a 70% reduction in vessel traffic, which negatively impacted Egypt’s trade activity, added the statement. Nevertheless, Egypt’s overall growth trajectory remained stable due to strong performances from other sectors.
Nirmeen El Sayyad, Manager of the Women on Boards Observatory at the Onsi Sawiris School of Business, American University in Cairo, emphasized the government’s efforts to promote production and boost exports, particularly in the manufacturing sector. She noted that while the devaluation of the Egyptian pound posed challenges, it has enhanced Egypt’s price competitiveness, opening up new export opportunities. “The government’s measures to facilitate production and boost exports have been key drivers of growth, especially in manufacturing,” she said. “The devaluation of the Egyptian pound, though a tough reform, could significantly strengthen Egyptian exports by leveraging price competitiveness.”
However, El Sayyad stressed that long-term sustainability hinges on continued improvements in procedural efficiency, infrastructure, and business process alignment. “Long-term sustainability is tied to easing procedures, aligning processes, and providing infrastructure for growth,” she added.
As the government gradually reduces its direct involvement in the economy, El Sayyad emphasized the importance of fostering an attractive business environment to encourage private investments. To achieve this, Egypt must focus on improving transparency, consistency, and streamlining bureaucratic processes, particularly in licensing and approvals, she explained. “As the government gradually reduces its involvement and allows more room for private investments to flourish, it is crucial to create an appealing business environment to attract both domestic and foreign investments,” she remarked.
El Sayyad acknowledged that while Egypt has made significant progress, full recovery will take time. She noted that continued reforms are crucial for sustaining growth. “The only way to strengthen economic welfare is to nurture and enhance the business environment and strengthen governance,” she concluded. While Egypt has made substantial strides, it will need to continue its reform efforts to achieve long-term, sustainable growth.
