The Central Bank of Egypt (CBE) has indicated a positive outlook for the Egyptian economy in the period ahead in its monetary policy report for the third quarter (3Q) of 2025. Notably, annual headline inflation is expected to continue declining, averaging 14% in 2025 and 10.5% in 2026, compared to 28.3% in 2024.  

The report showcases improving global conditions, a firmer exchange rate and supportive monetary policies as key factors contributing to easing inflation. “Recent moderation in global commodity prices, particularly oil, is likely to reduce import inflation pressures, supporting Egypt’s external balances and domestic price stability,” the report noted. 

While inflation is expected to stabilize, employees will still anticipate salary adjustments reflecting recent cost increases. “The government will concentrate on ensuring that citizens feel the impact of economic reforms through better wages, stable prices, improved living conditions, and enhanced health and education services,” said Prime Minister Mostafa Madbouly in November. 

At an AmCham event in November, Mohamed Youssef, CEO of Dcode Economic and Financial Consulting, said inflation is one of the main indicators businesses use to determine salary levels; however, it shouldn’t be the only one. 

Mohamed Faisal Al Nizami, principal consultant and Egypt country manager at Mercer, emphasized the importance of looking at the bigger picture rather than treating each year in isolation. “You need to consider the entire story since the market valuation changes in March 2022 — compare overall market increases with your own adjustments, assess your current positioning, and then decide what’s going to happen in 2026,” he explained. 

Global headwinds  

According to Youssef, “The global operating reality already faces headwinds from different crises … intertwined and reinforcing each other.” 

He said such crises include the ongoing trade war between China and the United States, challenges posed by climate change, and the rapid pace of technological advancement. He emphasized the emergence of artificial intelligence, which creates efficiency on one hand, but presents a risk of layoffs. 

Another headwind is “the global shift in socioeconomic polarity or economic polarization,” Youssed noted. He said the problem is aging populations in developed countries and young populations suffering unemployment in developing nations. This, in turn, directly affects growth projections, “putting all businesses and economies on edge.” 

Currently, the world is witnessing a reversal in some trends, Youssef noted, citing the shifting preference toward gold rather than the U.S. dollar. “This creates uncertainty for businesses and around how they can keep their talent.” 

Evolving expectations  

Youssef said employee expectations have shifted significantly. In the current climate of global economic uncertainty, the primary concern for most individuals is securing a stable job and income. At the same time, employees increasingly seek “meaning and purpose in their work, flexibility through agile working arrangements, opportunities for personal growth, continuous skill development, and career advancement,” he said. Moreover, fairness, transparency, equity and inclusion have become essential workplace priorities. Such evolving expectations are a direct response to today’s widespread uncertainty, he added.  

This has significant implications for Egypt’s economic recovery. Youssef explained that the country faced a series of economic headwinds beginning in 2022, but the economy is now entering a recovery phase as reflected in key indicators. “Egypt’s GDP growth hit 5% in Q2 2025, inflation stood at 12.5% in October 2025, the Egyptian pound is appreciating against the U.S. dollar, and foreign reserves have risen to historically high levels.” While external debt remains in the danger zone, the government is actively working to reduce it as a percentage of GDP, he added.  

Another challenge lies in the balance of payments, which is under pressure — particularly from the energy sector. Egypt has shifted from being an energy exporter to an importer, and this transition is a key factor contributing to the balance of payments deficit, Youssef said. 

He discussed the erosion of wealth, saying that between 2022 and mid-2024, interest rates were consistently lower than inflation. “On the fiscal front, Egypt has been implementing consolidation measures led by the Ministry of Finance, most notably tax reforms. However, debt repayment remains a significant challenge. In fact, when analyzing expenditures by type, interest payments alone account for nearly 50% of government revenue — meaning that for every 100 pounds collected, about 50 pounds go toward servicing debt.” 

Youssef was optimistic about the short-term outlook. He outlined the baseline scenario for the end of this year and next year, projecting real GDP growth to reach 4.7% by the end of 2026.  He expects the exchange rate to stabilize at about 52 pounds to a dollar, urban headline inflation to decline to 11% and the overnight lending rate to fall significantly to 11%. However, he cautioned that an adverse scenario remains possible if regional instability or geopolitical tensions escalate. 

Inflation and salary  

Youssef said that inflation peaked in September 2023 at 38%. A significant drop occurred beginning in February, largely due to year-on-year comparisons. This decline was supported by the easing of the foreign exchange crunch. “The drop is driven by the baseline effect, stable exchange rates, and reduced import costs,” he explained. 

The earlier surge in inflation was primarily fueled by regional conflict, the weaker currency, the debt burden, and fiscal consolidation measures implemented by the government. 

When discussing how businesses should revise salary structures, Youssef emphasized the importance of considering sector performance over the past five years as reflected in the average real growth rate. “The communication and information technology sector is experiencing significant growth … while tourism has also shown strong performance over the past five years.” 

Interestingly, he added that extractive industries, including petroleum companies, have recorded negative growth during the same period. Manufacturing remains a mixed bag: overall performance is solid, but success depends on whether companies are export-oriented and rely heavily on local components. Those that do are thriving, said Youssef. 

Beyond sector performance, businesses also must consider job descriptions when revising salary structures. According to Youssef, high-pressure roles are increasingly in demand, particularly frontline skilled workers and engineering professionals. Additionally, complex tech roles and white-collar positions are seeing rising demand, driven by the need for specialized expertise. 

He said inflation figures alone don’t always reflect how people feel on the ground. Inflation is based on the basket of goods monitored monthly and how much is spent on individual categories, which vary by income. When aggregated, this dilutes the impact of price changes on specific groups. Additionally, some products are subsidized and factored into the calculation, further influencing the overall figure. Youssef said, “Real income is not catching up, which is why people still feel the economic strain. Although inflation rates are declining, households have been losing purchasing power since 2022.” 

Competition for talent 

Al Nizami said Mercer’s remuneration survey for 2025 in Egypt covers 438 companies from different sectors, 200,000 employees, and 4,000 job descriptions. He added that multinational companies account for roughly 70% of businesses in Egypt.  

Salaries overall rose an average of about 20% in 2025,  according to Mercer’s latest update, and are expected to go up 18% in 2026.  

Any significant increase above that would be due to retention of key employees and competition for top talent rather than inflation, said Al Nizami, adding that 2026 “will be the toughest year in terms of negotiations with global teams.” 

In Mercer’s surveys, companies are compared to identify the highest and lowest payers with the energy sector traditionally in the top position. Today, the “chemicals sector leads the market,” Al Nizami said.  

He added that high-tech companies came into play by securing substantial business outside Egypt “by exporting their services or products,” he noted.  

Notably, many high-tech professionals in Egypt resigned from companies to work as freelancers on project-based assignments. “The pay they were receiving for a single project was equivalent to two or three years of their salary in Egypt,” said Youssef. In response, high-tech companies acted quickly by increasing salaries to retain talent.  

To do that, some companies have resorted to paying employees in dollars. “If you are a company that is operating in Egypt and selling in Egyptian pounds, it doesn’t make any sense that you consider paying salaries in dollars,” said Al Nizami. “However, if you have a revenue stream coming from your export department and if it’s somewhere around 50% of your revenue, so it’s balanced between pounds and dollars, then maybe yes, we can consider some other options.” 

Mercer tries not to encourage that because of the long-term consequences. “We’re trying to convince companies to take it a little slow. There are other alternatives that you can do instead of converting your salaries to another currency,” said Al Nizami. 

One alternative is long-term incentive (LTI) schemes, which have proven highly successful over the past couple of years. LTIs involve making a commitment to specific employees to provide rewards within a two- to three-year timeframe. For some companies, these incentives have even been structured in dollars or euros, offering a more stable approach compared to converting salaries into foreign currency, which can be far more disruptive, according to Al Nizami. 

He also stressed the importance of short-term incentives — such as bonuses, profit-sharing or sales commissions — paid annually. “Even companies that did not perform well or sectors that struggled still had to provide proper short-term incentives to retain employees, given the severe brain drain in recent years,” he explained. Egypt witnessed a significant outflow of talent to Saudi Arabia, the U.A.E., Europe, and elsewhere after the currency devaluation. 

Al Nizami further noted that Egypt may soon experience an adverse effect as quotas abroad, particularly in Saudi Arabia, are filled. “People are starting to return from Saudi Arabia to Egypt. This could make the talent war next year completely chaotic,” he warned. Over the past few years, when talent left, 90% were millennials, forcing companies to find replacements. “The most readily available option was Gen Z — despite their limited experience — leading companies to pay premiums as they competed for a very small talent pool,” Al Nizami said. 

According to Al Nizami, 2026 is expected to be highly competitive in terms of talent availability. “Companies should not relocate talent to Cairo, but instead consider opening satellite offices in other cities where talent exists,” he said.