Egypt was one of the few economies to witness positive GDP growth in the first two years of the Covid-19 pandemic, fuelled in part by strong consumer spending. According to a November 2021 report from Fitch Solutions, real household spending expanded by around 7% in both 2020 and 2021 – despite the widespread impact of the pandemic, which hit key sectors such as tourism particularly hard. This performance was fuelled by easing inflation – with the figure falling from 23.3% in FY 2016/17 to 5% in FY 2020/21 – as well as an increase in public sector wages, strong remittance inflows and government support measures in the wake of the health crisis. Even as real household spending is expected to slow to 3.2% in 2022, the sustained expansion will be fuelled by a rebound in tourism. Indeed, total household spending is expected to reach LE837.3bn ($53.2bn) in 2022, up from LE706.7bn ($44.9bn) in 2019.
Snapshot
Egypt’s household consumption has traditionally outpaced that of its North African counterparts, with expenditure accounting for 82.6% of GDP in 2019, compared to the regional average of 59%. There are also differences in spending power between Egypt’s governorates. According to the September 2021 consumption survey by the Central Agency for Public Mobilisation and Statistics, in FY 2019/20 the average per capita income was LE17,100 ($1090), with residents of urban areas earning around LE20,700 ($1320) and rural residents earning LE14,300 ($910).
Of the average household’s total consumption of LE62,600 ($3980) that year, consumer spending accounted for the bulk, at LE59,300 ($3770), with in-kind transfers, ration cards and bread subsidies, and transfer payments accounting for the remainder. Food and beverages accounted for the largest portion of spending, at 33.1% of the total, followed by housing and utilities (19.3%), health care (10.4%), clothing and footwear (5.7%), and transport (5.3%). Meat accounted for the largest share of food spending, followed by vegetables (16.2%); bread and grains (13.7%); dairy, cheese and eggs (13%); and oils and fats (7.9%). Given the predominance of food in current consumption patterns, rising inflation could have an outsize impact in the coming years. Starting in May 2021 annual food inflation has been growing, hitting 8.4% in December of that year – a figure that outpaced core inflation of 6%.
Average annual household income grew by 15% between FY 2017/18 and FY 2019/20, from LE55,300 ($3510) to LE63,600 ($4000). The bulk of the growth in consumption occurred in urban and border governorates, as well as urban areas in provinces. Meanwhile, the slowest growth was recorded in rural areas, which was reflected in an urban-rural divide: while average household consumption grew by 18.1% from LE61,800 ($3930) in FY 2017/18 to LE73,000 ($4640) in FY 2019/20, rural areas saw consumption expand by 11.7% from LE49,500 ($3150) to LE55,300 ($3510).
Key to Growth
The government recognised the importance of maintaining robust consumer spending during the pandemic. In July 2020 it announced a series of measures aimed at boosting consumer spending to LE100bn ($6.4bn), after the economic effects of the pandemic caused a temporary fall in demand. Included was an agreement with manufacturers to offer discounts of up to 20% on consumer goods, with ration card holders eligible for up to 30% off selected products. The government also announced it would set aside LE2bn ($1.3bn) in public funds to guarantee mortgages and consumer loans to stimulate lending.
Consumer spending is expected to continue being a driver of growth, supported by Egypt’s young, growing population; changing preferences; urbanisation; and a burgeoning middle class. According to a 2021 Fitch Solutions report, the average household income will increase from LE76,000 ($4830) in 2021 to LE109,000 ($6930) by 2025. This will nearly double the proportion of Egyptians in the middle class – classified as those earning between LE78,000 ($4960) and LE156,000 ($9910) – from 34.3% to 58.2% of the population.
