Egypt’s economy expanded by 3.5% in the first quarter of the 2024/25 fiscal year, up from 2.7% in the same period last year, signaling resilience in the face of geopolitical tensions and global economic uncertainty.

According to the Ministry of Planning, Economic Development, and International Cooperation, the uptick in growth was driven by significant improvements in non-petroleum manufacturing, transportation, and tourism. These sectors offset the sharp decline in activity in the Suez Canal and extraction industries, underscoring a diversified economic recovery.

The non-petroleum manufacturing sector recorded a growth rate of 7.1% in the first quarter, buoyed by streamlined customs clearance processes and increased availability of production inputs. The sector’s industrial production index, excluding crude oil and petroleum refining, showed an average growth of 6%, reversing a contraction of 7.7% in the same quarter last year. Government initiatives to strengthen manufacturing capacity have played a pivotal role, signaling sustained momentum for one of the country’s most vital economic segments.

Transportation and storage emerged as another standout performer, posting 15.6% growth, the highest among all sectors. This was attributed to ongoing improvements in infrastructure and operational efficiency. Notable increases in passenger rail and metro usage, alongside a 59% surge in rail freight activity, were highlights of the quarter, reflecting the fruits of long-term investments in transportation upgrades.

Tourism also contributed significantly to growth, with an 8.2% rise supported by a recovery in global travel and government measures to attract visitors. The total number of tourist nights climbed to 51.6 million during the quarter, up from 47.7 million a year earlier. Revenues from the tourism sector, a traditional mainstay of the Egyptian economy, remain a critical driver of foreign exchange inflows.

However, the picture was less optimistic in other areas. The Suez Canal sector suffered a contraction of 68.4% in activity due to a decline in the number of vessels traversing the canal amid heightened geopolitical tensions. Revenues fell to $970 million, a steep drop from $2.6 billion in the same quarter last year. Meanwhile, the extraction sector contracted by 8.9%, with oil activity down 6.2% and natural gas production plummeting by 18.8%. Despite this, officials expressed optimism about a rebound in the coming months as new exploration projects and efforts to resolve outstanding dues to foreign oil and gas companies are expected to revive the sector.

Exports provided some relief, increasing by 3.9% to $10.46 billion, driven by strong performances in pharmaceuticals, perfumes, and ready-made garments. Pharmaceutical exports alone surged by 26.5% in the quarter, highlighting the success of targeted initiatives to expand this sector.

The telecommunications and information technology sector maintained double-digit growth, expanding by 12.2%. Investments by telecommunications companies, along with rising demand for fixed-line and mobile services, underpinned this robust performance.

Overall, the government’s economic policies have started yielding results, with GDP growth expected to reach an average of 4% for the full fiscal year, peaking at 4.8% in the fourth quarter.

Efforts to attract private investment have seen a notable boost, with private sector contributions rising significantly in the first quarter. High-frequency indicators, including the Business Barometer index and Purchasing Managers' Index, also suggest positive sentiment among businesses, driven by gains in production, sales, and export activity.