Egypt's economy experienced a 3.5% growth in the first quarter (Q1) of the FY2024/25, according to the Ministry of Planning, Economic Development, and International Cooperation. This marks an increase from the 2.7% GDP growth recorded during the same quarter of the previous FY. The ministry's quarterly update on Egypt's economic performance highlighted that this GDP growth improvement was driven by positive performance in key sectors, particularly the non-petroleum manufacturing sector. The government attributes this overall growth to economic reform policies aimed at restoring macroeconomic stability and strengthening the governance of public investments. The non-petroleum manufacturing sector demonstrated notable growth, recording a 7.1% increase in Q1 FY2024/25 compared to the same period last year. This marks the second consecutive quarter of positive growth for the sector, following the implementation of economic reform policies that began in March 2024. The growth is attributed to measures including streamlined customs clearance processes at ports, an increased supply of essential production inputs and accelerated industrial production. These efforts are further reflected in the monthly Industrial Production Index (excluding oil refining), which grew by 6% in Q1 FY2024/25, compared to a 7.7% contraction in the same quarter of the previous FY. The export sector also saw positive results, particularly in the chemical and fertiliser industries, pharmaceuticals, perfumes, cosmetics, and ready-made garments. Several other key sectors contributed to the positive growth figures, including communications and information technology which grew by 12.2%, transportation and storage with a 15.6% growth, tourism (reflected in restaurants and hotels) at 8.2%, electricity at 7.4%, social services, including health and education at 4.5% and agriculture which grew by 2.65%. This growth aligns with the government's strategy to diversify the economy by enhancing the contributions of the manufacturing, agriculture and ICT sectors to GDP, in addition to sectors related to human and social development. However, the Suez Canal sector has continued to be significantly affected by geopolitical tensions in the region, experiencing a contraction of 68.4% during Q1 FY2024/25. This is due to a decrease in the number of vessels passing through the canal, which has resulted in reduced revenues. The extraction sector also experienced a decline of 8.9% in Q1 FY2024/25. The production of gas and oil is expected to improve in the coming months, due to the government's efforts to settle outstanding dues to foreign oil and gas companies. In terms of investment, private investments saw a significant increase of 30%, reaching 133.1bn pounds at constant prices, compared to 102.3bn pounds in the same quarter of the previous FY. This is in line with the Ministry of Planning, Economic Development and International Cooperation's efforts to implement robust governance of public investments. Conversely, public investments experienced a substantial decline of 60.5%, totaling 57bn pounds, down from 144.4bn pounds in the corresponding quarter of the previous FY. High-frequency data supports positive developments in Egypt's economic activity. The Purchasing Managers' Index (PMI) showed a modest increase, reaching 49.2 points in November 2024, compared to about 49 points in October, remaining close to the neutral threshold (50 points) for the third consecutive month. This was primarily driven by expansions in manufacturing activities, as well as a continued increase in new foreign export order inflows, which have risen for seven consecutive months. Additionally, the Business Barometer index, issued by the Egyptian Center for Economic Studies, rose above the neutral threshold during Q1 FY2024/25, reaching 51 points. This improvement is driven by gains in production, sales, exports, and production capacity utilization. This comes after a decline in the index in the fourth quarter of FY2023/24. The Ministry of Planning, Economic Development, and International Cooperation projects that GDP growth will reach 4% in the FY2024/25. This positive outlook is supported by forecasts from various international institutions, and is expected due to the government's ongoing efforts to foster a private sector-led growth, while adopting measures to refine monetary and fiscal policies to better support economic recovery.
