The overall state of the construction market remains one of caution as challenges have continued to affect market activities during 2Q 2023, including reduced supplies of foreign currencies and a slowing down in construction materials supply chains. However, we maintain a degree of optimism as the decreasing value of the Egyptian pound has attracted foreign investors, specifically in the real estate sector.

During 2Q 2023, some construction materials saw moderate increases reflecting historic and seasonal trends. In addition, most commodities have increased in price in line with Egypt’s overall inflation.

We expect the majority of construction materials to not increase further in price provided foreign exchange rates remain stable, although seasonal norms in price fluctuation for the remainder of the year will be seen.

That said, Gleeds is placing emphasis on imported materials and equipment, which through previous experiences have led to budget over-runs and continuous supply chain delays. The prices of these materials and equipment are expected to continue rising as long as the shortage of foreign currency and an increase in exchange rates exist — both being drivers for much of the cost growth in construction materials since 4Q 2022.

Following the removal of the Letters of Credit (LC) requirement by the Central Bank of Egypt (CBE), the construction market is showing some recovery from the supply chain shortages that took place in 2022. While most imported construction materials and items are available in the market, prices have been hit by storage charges in ports pending their release from customs, pertinent to LCs issuance.

Though key indicators in the construction sector, and throughout the economy, are showing positive signs, recovery within the construction market appears uneven and fragile.

Market players have been learning from previous experiences in adapting to the current situation by different methods of sharing or mitigating pricing risks. All of which have reflected in the successful completion of projects that were impacted by the inflationary wave last year. This also became the norm in tendered projects, where both employers and contractors propose different procedures and contract clauses to minimise and avoid losses and ensure the successful delivery of projects.

All in all, it’s an exciting time for Egypt as we go full steam ahead into the next quarter.