Business activity in Egypt’s non-oil private sector contracted in September, as new orders declined at the fastest rate in five months, according to new survey data released on Sunday.

The S&P Global Egypt Purchasing Managers’ Index (PMI) slipped to 48.8 from 49.2 in August, marking the lowest reading in three months and remaining below the 50 threshold that separates growth from contraction.

The latest downturn was driven by a sharp fall in new sales, with firms citing subdued demand, price increases, and rising wage costs as key obstacles. The report indicated that order book inflows weakened amid a challenging economic environment and soft consumer sentiment.

Employment growth, which had shown modest gains in the previous two months, stagnated as most businesses reported no changes in staffing levels.

“Although companies are struggling to gain new work amid challenging market conditions as a whole, they can take some comfort from a softening of input cost pressures,” said David Owen, Senior Economist at S&P Global Market Intelligence.

Inflation Eases As Currency Strengthens

Input cost inflation eased to its lowest rate since March, helped by a stronger Egyptian pound against the U.S. dollar. However, wage expenses climbed at their fastest pace since May 2024, reflecting higher living costs and recent increases in the national minimum wage.

Despite lower purchasing activity, inventory levels rose for the first time since May, as some firms opted to stockpile materials in anticipation of future price hikes. The survey also reported that export sales fell for the tenth straight month, marking the steepest decline in three years.

Business confidence dipped to one of its lowest points in the survey’s history, with many firms expressing concern about sustained price pressures and limited growth opportunities in the near term.

Still, Egypt’s broader economy has shown signs of resilience in 2025, supported by fiscal reforms and stronger foreign investment flows. The country recorded a 4.5% expansion in the 2024–2025 fiscal year, nearly double the previous year’s 2.4%, according to government data. The rebound has been largely attributed to International Monetary Fund (IMF)-backed structural reforms and renewed activity in the manufacturing sector.

Inflation, which had soared to almost 38% in late 2023, has since fallen sharply, reaching 13.9% by July 2025, though it remains above the central bank’s target range. Economists note that the moderation has restored a measure of price stability, improving business predictability and consumer confidence.

Reform Agenda Aims For Long-Term Growth

A major pillar of Egypt’s economic transformation is the National Economic Development Narrative, launched in August 2025, which seeks to achieve 7% annual GDP growth by 2030. The initiative prioritizes expanding private sector participation, increasing total investment to 18% of GDP, and ensuring that two-thirds of this investment originates from private enterprises.

To attract investors, the government is pursuing an aggressive reform agenda, simplifying tax procedures, reducing tariffs, and offering targeted incentives across key strategic sectors. Officials also point to the March 2024 floating of the Egyptian pound as a turning point, which stabilized the currency market, enhanced liquidity, and improved access to foreign exchange.

The reforms have already begun to pay off. Non-oil manufacturing grew 14.7%, while fintech, e-commerce, and renewable energy sectors reported notable gains, buoyed by expanding digital infrastructure and a young, technology-driven population.

However, challenges persist. Ongoing disruptions in Red Sea shipping lanes have affected Suez Canal revenues, while inflationary pressures and global commodity price swings continue to test business confidence.

Economists argue that maintaining reform momentum and ensuring policy consistency will be crucial to sustaining Egypt’s recovery. As the nation balances short-term challenges with long-term ambitions, its path forward depends on deepening investor trust, improving competitiveness, and accelerating private sector-led growth.