Cairo – January 28, 2025: Egypt’s real household spending will increase by 3.1 percent year-on-year (YoY) in 2025, reaching LE 2.1 trillion, slowing from the previously predicted 7.5 percent for 2024 on the back of increased government spending on subsidies, according to the latest forecast by Fitch’s research arm BMI.
The 4.4 percentage point decrease attributed to the diminishing impact of the nearly 50 percent YoY increase in subsidies and social safety nets in the current fiscal year’s budget, which previously helped boost consumer spending.
Looking further ahead, BMI expects household spending growth to stabilize, with an average annual increase of 4.4 percent YoY, which will bring total spending to LE 2.4 trillion by 2028.
When excluding inflation, nominal household spending is expected to rise by nearly 21.5 percent in 2025, reaching LE 14.7 trillion, according to BMI’s report. This growth will continue at an average rate of 18.5 percent YoY, reaching LE 20.8 trillion by 2028.
BMI highlighted that food and beverage spending will see a significant jump in 2025 due to price inflation in this sector. Spending on food and beverages, which is expected to make up a large portion of consumer spending, is projected to grow by 22.3 percent YoY to LE 5.2 trillion, up from an 8.2 percent growth rate in 2022.
Despite this, recent data shows food inflation is slowing, with food and beverage prices dropping for six consecutive months, and December 2024 showing a 20.3 percent YoY increase, down from 31.9 percent in June. Monthly, food prices decreased by 1.5 percent in December, marking the second consecutive month of price drops after a 1.9 percent fall in November.
Spending on clothing and footwear is expected to grow as well, but at a slower pace, reaching LE 819.6 billion by the end of 2025, with a 20.1 percent YoY increase — down from 34.9 percent in 2024.
BMI attributes this slowdown to limited real gains in disposable income in 2024 and rising import costs, which are pushing consumers toward locally produced apparel.
For 2025, BMI projects that disposable incomes will increase to LE 185.6k, up from LE 155.1k in 2024. However, much of this increase will be driven by inflation, meaning the real purchasing power of households will not significantly improve.
Looking to the longer term, household incomes are expected to rise by an average of 17.5 percent YoY between 2024 and 2028, reaching around LE 255.7k by 2028, outpacing the projected 14.4 percent average annual inflation.
BMI also anticipates that the percentage of households with disposable income below USD 5,000 will decrease from 89.2 percent in 2024 to 69.7 percent in 2028 as economic activity strengthens and unemployment declines, driving income growth.
BMI remains optimistic about the future of Egypt's retail sector, noting “if Egypt's economy can navigate the current crisis, its middle class has the potential to become the fastest growing in the world, bearing in mind the size of the market's population. This growth in household incomes will attract new players to the retail market, which will help to consolidate and modernize the industry.”
However, BMI also identifies significant challenges, particularly geopolitical risks that could slow investment, reduce tourism, and put further pressure on the Egyptian pound.
A reduction in subsidies is expected to increase inflation, putting additional strain on household budgets and limiting spending on non-essential goods.
“Inflation and the depreciated LE have stunted income growth and will hinder the population moving up the income brackets. This will delay growth of the affluent middle class,” it added.
Despite these hurdles, the report suggests that a potential easing of monetary policy could support consumer spending, “particularly credit-driven spending”.
The retail sector is also likely to benefit from new investments in malls and the expanding middle class’s demand for goods.
According to the report, Egypt’s youthful population and evolving spending habits present opportunities for online retailers, and enhance demand for non-essential items over the medium-to-long term.
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