Ramadan's Economic Situation in 2023
Updated 3/14/2023 8:00:00 AM
As the holy month of Ramadan approaches, the Egyptian markets are expecting to face some challenges due to soaring inflation. However, consumer behavior during the holy month is both likely and unlikely to change, which could positively affect the economy. When it comes to food, people do not stop consumption; however, many are set to consume rationally this Ramadan.
Market Changes
The government has worked on securing food supplies for citizens ahead of Ramadan. This comes as the Egyptian Ministry of Supply and Internal Trade, represented by the General Authority for Supply Commodities, has contracted for 50,000 tons of imported white rice. Moreover, the rates of supplying the cane crops from farmers reached 3.2 million tons, according to Egyptian Sugar and Integrated Industries (ESIIC), a subsidiary of the Holding Company for Food Industries. ESIIC further announced that about 310,000 tons of sugar were produced from the quantities that were supplied by farmers, and are being refined, packaged, and supplied.
In February, Minister of Supply and Internal Trade Ali Moselhy announced that the state’s strategic reserve of commodities is safe and sufficient for several months, noting that the wheat reserve is sufficient for 4.6 months. Meanwhile, the oil reserves are sufficient for about 5.1 months, and the rice reserves are sufficient for Egyptian consumption as all mills working with rice are reviewed, the minister added.
However, due to inflation, the market is facing challenges ahead of Ramadan. Consumer prices witnessed a 31.9% annual increase in February, which is the fastest in more than five years, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).
Rationalizing Exaggerated Consumption
In Ramadan, Egyptians like to feast in family gatherings and with friends by serving different dishes and desserts. Huda, a 30-year-old housewife, tells Arab Finance that this year her feast tradition will change. “Of course, it will be affected. I mean, maybe I used to make two or even three types of meat. Now, I am seriously thinking about cooking only one type, and the idea of gathering for a dish party is not useful for the family. It is possible with our friends, but the family does not understand this.”
Meanwhile, Fatma, a 30-year-old working mother, says that “gathering for a dish party is a very good idea. I might do that, but unfortunately, some people might find that unusual, but I like it in these circumstances.”
When it comes to Yameesh, nuts, and desserts like Qatayef, Huda says, "I will get half of the quantity that I used to buy, and there are things that I will not even purchase this year," without specifying the products. For her part, Fatma states that she would only go for coconut and peanuts this year for dessert stuffing.
Huda also tells Arab Finance that she really wanted to try purchasing from the Ahlan Ramadan (Welcome Ramadan) outlets, but “people do not give you the opportunity to buy anything as they crowd in an unnatural way!”
Growth Potential vs. Recession
It is still unclear whether Ramadan will provide a chance for the market to balance and avoid recession amid inflation. Murad, a seller of grains, cereal, and Yameesh, tells Arab Finance: “The sales used to increase concurrently with Ramadan because of Yameesh sales, but the profits do not increase with price hikes, and in order to sell, we had to reduce the profit margin. As for the current year, the crises and the huge increase in prices highly pushed people’s purchases lower.”
Meanwhile, Youssef, a seller of leafy greens, tells Arab Finance that “sales increase during the period before Ramadan, especially on the first and second days, and then decrease completely.”
Moreover, Mohamed El-Sheikh from the Spice Division at the Chambers of Commerce, tells Arab Finance: “In fact, I can never say that commodities [such as sugar or rice] are in short supply, but these goods, like all others in Egypt, are subject to inflation. According to the CBE, the inflation rate hit 40%, with some commodities experiencing higher inflation, which led to a state of recession. Therefore, people will try to cope as much as they can when looking at rice, sugar, oils, and butter, which are all not immune to either inflation or recession.”
“Yameesh products have recently become a luxury. People might forgo Yameesh and drinks, even when products are available in the market,” El Sheikh adds.
As for people’s capacity to have the same consumer behavior as in the past Ramadan, El Sheikh notes that “we deal with different classes of society. The ones buying Ramadan bags are the middle class, who are not specifically rich but like to cooperate in feeding the poor. Today, those who were preparing 100 or 50 Ramadan bags are preparing the quarter due to financial constraints.”
El Sheikh explained that decreasing purchases has a great effect on trade. “This could have negative returns on the wholesaler, retailer, and importer. Currency devaluation has forced importers to cut imports by nearly 30% or 40%, with capitals not seeing enough growth as in the past; consequently, the purchasing power from abroad will decrease as well. An amount of $100,000 does not value the same as before devaluation as its value would be equivalent to $70,000 nowadays,” he added.
Accordingly, people are not having the same consumer behavior, yet they are trying to cope with inflation challenges. The holy month will reveal whether or not this will affect the economy.
By Sarah Samir
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