Egypt's economy has faced a series of challenges, including soaring inflation rates and currency devaluation, but through strategic partnerships like its BRICS+ membership, the country is positioning itself for long-term stability and growth.
Despite the tough conditions, Egypt’s resilience shines as it navigates these hurdles with a clear focus on economic recovery and diversification.
Rising Inflation and Currency Devaluation
In February 2022, Egypt’s headline inflation rate was 8.81%, a month later it rose to 10.49% and the increasing trajectory continued throughout the year to reach 21.26% in December. The highest the rate of Egyptian inflation was 38% in September 2023, and the current inflation rate is 23.95%. A significant contributing factor to this situation is the Russian-Ukrainian–catalyst for the local economic crisis. Egypt relies heavily on the two countries for 80% of its wheat imports, a staple in the population’s diet.
Further deepening the situation, the Central Bank of Egypt (CBE) devalued the Egyptian Pound (EGP) in March 2022 by 14% because foreign investors had pulled out significant amounts of funds out of the country when the war began ($20 billion); this has resulted in the EGP losing half of its value to the US Dollar. As the value of a state’s currency declines, it becomes more expensive for goods to be traded and commodities, again become more expensive for consumers.
BRICS+ Membership: A Path to Economic Recovery
Egypt’s BRICS+ membership presents significant long term advantages for its economic recovery by fostering trade diversification, enhancing foreign investment inflows, and strengthening monetary stability through alternative trading partners. By engaging with alternative trading partners such as China’s investments into infrastructure, funding from fellow Arab BRICS countries - the UAE, or Indian companies investing in Egyptian pharmaceutical, chemical and IT industries.
Through BRICS, Egypt has an opportunity to reduce its dependence on Western economic systems, the instability that the US Dollar causes to the EGP and ensuring stable access to crucial commodities to citizens and aids in mitigating supply chain volatility. The accessibility to BRICS-entities such as the NDB, encourage foreign direct investment (FDI) to provide essential capital for infrastructure, industry and innovation, all key drivers for sustainable economic growth.
Over time, this promotes agency and sovereignty for the Egyptian Treasury to be less reliant on the Western-centric SWIFT system and opens an opportunity for Cairo to align their fiscal system with nations that have had similar experiences with the US Dollar; but seek long term monetary stability.
Monetary Policy and Inflation Stabilisation
As of October 2024, the Egyptian inflation rate sat at 26.5% and there were expectations for the inflation rate to stabilise through to the end of 2024, and continue the decline into the first quarter of 2025. The CBE has demonstrated significant success over the last four months and today’s inflation rate reflects this progress. Despite the regional conflicts, the monetary tightening policy decisions, and a potential return to protectionist policies may be the best route to manage the interest rates and associated risks.
According to the Central Agency for Public Mobilisation and Statistics, Egypt's inflation rate has decreased due to lower prices for vegetables, fish, and seafood, providing some relief to consumers. However, key sectors such as food and beverage, construction, and agriculture continue to face challenges. The rising costs of essential goods, particularly food and clothing, are putting a strain on households, especially those living below the poverty line- consisting of about 30% of the population and rising unemployment, making it increasingly difficult to afford basic necessities.
Tourism and Consumer Adaptation
Despite regional conflicts affecting tourism numbers, Egypt remains a top global destination, especially for cultural and historical travel. The government is actively working on revitalising the sector by promoting domestic tourism and offering competitive travel packages. As inflation shifts spending habits, there’s also a rise in demand for budget-friendly local experiences, which could reshape Egypt’s tourism industry in the long run.
The shopping experience after combining these economic elements makes for a vastly different shopping experience to times of less economic distress. This results in a transformation of Egyptian consumer spending habits and preferences. While inflation has made everyday expenses more burdensome from both the customer and merchant perspective, it has also driven adaptation and resilience. Many small and medium-sized enterprises (SMEs) are turning to local suppliers, digital platforms, and strategic pricing to retain customers. This period of economic hardship is reshaping Egypt’s business landscape, pushing for greater self-sufficiency and efficiency in various sectors.
Outlook for 2025: A Brighter Future?
While Egypt faces significant economic hurdles, its response to inflation is gradually yielding results. Policy measures have shown early success in curbing inflation, and Egypt’s BRICS+ membership presents new opportunities for trade and investment. With economic diversification efforts and a resilient private sector, the country is positioning itself for a more stable and sustainable future. With Q1 of 2025 expected to look brighter, shopkeepers and customers alike must be looking forward to less bruised pockets.
Written By
*Dr Iqbal Survé
Past chairman of the BRICS Business Council and co-chairman of the BRICS Media Forum and the BRNN
*Banthati Sekwala: Associate at BRICS+ Consulting Group Egyptian and South African Specialist
**The Views expressed do not necessarily reflect the views of Independent Media or IOL.