Fitch Cuts Outlook for Egypt’s Construction Sector amid Regional Risks

Global ratings and research firm Fitch Solutions has revised downward its growth outlook for Egypt’s construction sector for fiscal years 2025/26 and 2026/27, citing geopolitical tensions, rising costs, and a weakening investment environment.

According to the latest report, the sector is expected to grow by just 0.4% in FY 2025/26, before accelerating to 4.9% in FY 2026/27. These projections mark a significant downgrade from previous estimates of 5.6% and 6.6%, respectively. The revision also reflects a slowdown compared to last fiscal year’s real growth of 4.1%.

Fitch Solutions attributed the weaker outlook to a combination of high financing costs, persistent inflation in construction materials, and a reassessment of government infrastructure spending priorities.

Interest rates above 20% have sharply increased borrowing costs, while rising prices for imported inputs such as steel and cement, exacerbated by energy subsidy reforms, have squeezed profit margins across the sector.

The report also highlighted a shift in public investment strategy, with the government redirecting spending toward debt management in line with its commitments under the International Monetary Fund program, which aims to reduce the role of the state and expand private sector participation.

External pressures are also weighing on the sector. Fitch Solutions pointed to ongoing geopolitical tensions, particularly between the United States and Iran, as a key factor dampening investor confidence and increasing uncertainty.

Rising energy prices and supply chain disruptions have further intensified inflationary pressures, affecting project timelines and construction costs. Although a temporary ceasefire has eased immediate risks, the report warns that stabilization of energy markets and logistics chains is likely to take time.

Despite near-term weakness, the outlook over the medium term remains cautiously positive. Fitch Solutions expects structural drivers, such as rapid population growth, ongoing urbanization, and sustained government commitment to infrastructure development, to support a recovery in the sector.

Large-scale mega projects, including the New Administrative Capital and the Ras El Hekma development, are expected to play a central role in attracting both domestic and foreign investment, particularly from Gulf Cooperation Council countries.

While short-term volatility persists, analysts suggest that Egypt’s construction sector could regain stronger momentum once financing conditions ease and geopolitical risks subside.