The impact of economic instability and inflation on the construction contractors and real estate companies in Egypt

Abstract

The consensus among economists is that unexpected inflation has a negative impact on the performance of the macroeconomy. Unpredictability in price levels discourages investment and reduces consumer spending, both of which reduce demand and impede economic growth. As a result, the construction industry has been severely impacted, and investment in the sector has halted; this highlights the need for further research into the effects of inflation and economic instability on the building process. The research employs a mixed-methods approach, combining qualitative and quantitative analysis. Through a comprehensive literature review, relevant theories, concepts, and empirical studies are explored to provide a theoretical framework for understanding the impact of economic instability and inflation on the construction and real estate industry. Primary data is collected through a questionnaire to capture the experiences and perspectives of construction contractors and real estate companies in Egypt. Engineers and experts from Al-Ahly Sabbour, Palm Hills Developments, Talaat Mostafa Group, SODIC, Orascom Construction, Hassan Allam, AluNile, and The Arab Contractors participated in the descriptive method. The analysis was done using a study questionnaire and the results were prepared using different software tools, like MS Excel and others. The study concluded that the primary contributors to economic instability in Egypt were high inflation rates, a lack of FX reserves, government intervention, and poor management, as these factors affected economic instability in the operations of contracting and construction companies by increasing construction material costs. There was a significant increase in the cost of construction materials and labor due to inflation and labor costs, which had a significant impact on the cost of building materials and workers. This study was done to find out the effects of the inflation and economic instability in Egypt, especially during these current days where the inflation has really hit the economy very hard. The main factors affecting the industry were studied and ideas were brought out to find long-term solution for this problem.