Fitch Solutions’ research unit BMI sees real household spending growing by 3.1% y-o-y in 2025 to EGP 2.1 tn, a slowdown from the 7.5% for 2024, BMI said in its Egypt Consumer & Retail Report for Q1 2025. The notable 4.4 percentage point dip is attributed to the declining effect of a nearly 50% y-o-y spending increase on subsidies and social safety nets in the current fiscal year’s budget that came into effect in July and helped boost consumer spending.

Household spending growth is expected to stabilize in the medium term, with the research unit forecasting an annual average growth rate of 4.4% y-o-y that will hit EGP 2.4 tn by 2028.

Household spending habits could also be affected by a new social protection package, which Prime Minister Moustafa Madbouly teased earlier this month will entail increases in the minimum wage, tax thresholds, social protection coverage, and pensions, two government sources previously told EnterpriseAM. The package is expected to be approved by March or after receiving directives from the presidency, our sources said.

It’s a very different picture when not taking into account inflation, with household spending in nominal terms set to increase by nearly 21.5% to EGP 14.7 tn in 2025. BMI then expects this to be followed by an annual average of 18.5% y-o-y to reach EGP 20.8 tn by the end of 2028.

BMI also expects spending on food and beverages to jump this year, pointing to food and beverage price inflation as the primary reason. The research unit sees spending on the sector — which is expected to contribute the bulk of consumer spending in 2025 — growing by 22.3% y-o-y to EGP 5.2 tn this year, up from a growth rate of 8.2% back in 2022.

Recent data had been showing food inflation going the other way, with annual food and beverage price inflation clocking in six consecutive months of declines, coming in at 20.3% y-o-y in December after falling from 31.9% in June. On a monthly basis, food and beverages have been falling, with December recording a 1.5% decrease, marking the second consecutive month of price decreases after a 1.9% decline in November.

Clothing and footwear spending is also projected to grow, albeit at a slower pace, clocking in EGP 819.6 bn by the end of the 2025 and recording a 20.1 y-o-y growth rate, down from 34.9% in 2024. BMI attributes the expected slowdown to consumers’ disposable incomes experiencing “limited to no real gains in 2024,” coupled with more expensive imports prompting buyers to consume more locally crafted clothes and footwear.

Disposable incomes will rise, but won’t outpace inflation this year, BMI forecasts. Egypt's annual household disposable income is expected to average around EGP 185.6k in 2025 — up from EGP 155.1k in 2024. However, the bulk of the “increase in the domestic currency will be inflation driven.”

In the longer term, household incomes are expected to increase by an average of 17.5% y-o-y between 2024-2028 to reach around EGP 255.7k, outpacing BMI’s forecast of average consumer price inflation of 14.4% y-o-y for the same period. The research unit also sees the proportion of households with disposable income of USD 5k or less to fall from 89.2% in 2024 to 69.7% in 2028 “as economic activity increases and unemployment falls, supporting income growth.”

THE FUTURE OF OUR RETAIL SECTOR -

Fitch is hopeful for the future of Egypt’s retail sector, writing that “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 modernise the industry.”

On top of BMI’s list of headwinds facing our retail sector are the geopolitical risks, which the research unit warns could “result in a slowdown in investment activity, a reduction, a reduction in travel and tourism, and a further depreciation of the EGP.”

The anticipated subsidies’ cut will fuel inflationary pressure, squeezing household budgets and curbing spending on non-essential items, according to the report. “Inflation and the depreciated EGP 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.

However, the looming monetary policy easing is seen giving our retail sector a shot in its arm, by supporting consumer spending “particularly credit-driven spending,” the report read. The sector will also benefit from investment in new malls and the growing demand from the expanding middle class. Additionally, Egypt’s young population and their spending habits will create opportunities for online retailers, and enhance demand for non-essential items over the medium-to-long term. The growing access to formal financial services will benefit consumers over the medium-to-long term. BMI also expects that “Egypt as a regional manufacturing hub, can present an interesting route to market for some retailers.”

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