Egypt’s construction sector is in the hardest stretch of its expected contraction, and the central question for the industry now isn’t whether the recovery will come. Despite closing FY 2025/26 with near-zero real growth, Fitch Solutions sees real growth jumping to 4.9% in FY 2026/27 on the back of Gulf FDI inflows into megaprojects like Ras El Hekma. Big industry players tell EnterpriseAM that the nominal contract values currently on the books are masking a deep liquidity squeeze and margin erosion that could push smaller firms into bankruptcy before private investment lands in their accounts.

The market has split into two tracks. Large contractors have shielded themselves by exporting work and reducing exposure to the local market. Orascom Construction’s FY 2025 results showed a record USD 9.0 bn backlog — growth that did not come from Egypt but from geographic diversification. Its US backlog jumped 80.6% to USD 2.89 bn, driven by data center and aviation projects, while its MENA and Africa backlog rose on major projects in Saudi Arabia and the UAE. Second- and third-tier contractors are on the other side of the trade. “We are selling assets and land to stay in the market,” Egyptian Federation for Construction & Building Contractors (EFCBC) board member Shams El Din Youssef tells EnterpriseAM. “Some second- and third-tier companies — and even first-tier firms that did not hedge — have already gone bankrupt.”

The books may still show revenues flowing, but on the ground, contractors are dealing with a liquidity crunch and sharp margin erosion. Current contract values are misleading, Youssef says. “The contract value for all contractors in Egypt is a nominal value — when I add variable cost items and price differences, the value doubles.” In one government contract, asphalt costs rose from EGP 100 per sqm at signing to EGP 350 today, he tells us. State compensation covers only 60-70% of contractors’ actual losses, leaving companies to bear losses they are neither obligated nor able to carry.

Imports make the squeeze structurally worse. “No less than 40-50% of project money goes to supplies, equipment, or electromechanical works imported from abroad in foreign currency,” EFCBC Head Mohamed Sami Saad tells us. The sector’s reliance on imported inputs means external shocks — FX volatility, regional supply disruptions — hit ongoing projects directly rather than working through over months.

The macro picture

The macro picture confirms what contractors are reporting. Fitch cut its real growth forecast for the sector to 0.4% in FY 2025/26 from an earlier 5.6% projection. The downgrade is driven by a strategic shift in public spending, with the government redirecting priorities toward debt management in line with IMF program targets — scaling back the public sector's role and creating what Fitch describes as a “visible investment gap.” Construction activity already shrank 0.3% in 1H FY 2025/26, and Fitch warns the difficult operating environment will persist amid high financing costs, building materials inflation, and regional conflict spillovers.

The state has stepped in with emergency measures. The EFCBC formed a crisis committee and requested contract extensions to protect companies from delay penalties and project withdrawals. The government has granted contractors additional time, Saad says. “The government is making every effort to support the sector because it employs a very large workforce and moves a lot of local industries,” he tells us.

Skilled workers are leaving. Beyond the liquidity crunch, the sector is bleeding talent to the Gulf — a migration that’s pushing local wages higher and adding another layer of pressure on developers and contractors, Fitch notes. The local talent drain tracks a wider global construction labour squeeze that the Project Management Institute expects to grow by 2.5 mn project managers by 2035.

How does the sector hold on until recovery?

Shift toward maintenance and operations. “We are advising [contractors] to move from contracting into maintenance and operations,” Saad tells EnterpriseAM. “Construction will slow, but maintenance and operations contracts are sustainable and include large amounts over long periods.” The federation has also begun preparing companies to work under international contract formats ahead of dealing with donors and Gulf and foreign investors — a move that would let domestic contractors plug into the FDI-driven recovery rather than just wait for it to land.

The second push is making construction a real FX earner. Contractors are lobbying for state backing to export their services more aggressively, with Youssef framing the ambition in big terms — he wants Egyptian construction exports to one day rival Suez Canal revenue. The current obstacles are concrete. “I am ready to provide all guarantees, but I cannot get a letter of guarantee to work abroad,” Youssef says. Red tape compounds the problem: “Issuing a work visa for an Egyptian project manager in Iraq costs USD 2.5k — how can I compete?”

For now, contractors don't see the private-sector pipeline as a quick fix. “Developers themselves are not launching many projects right now,” Youssef says, as they feel the impact of weaker government liquidity. The maintenance-and-operations pivot Saad is recommending, and the export-services push the federation is lobbying for, are both medium-term plays. The bridge to FY 2026/27 will have to be walked on what contractors already have on their books.

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