World Economy

Egypt’s Inflation Surge Slows

Urban inflation rose for the fifth consecutive month to reach an annual 30.9%.Urban inflation rose for the fifth consecutive month to reach an annual 30.9%.

Egypt’s urban consumer inflation rose at a slower pace in March and core inflation dipped, the first signs of stabilizing prices after the shock from a huge currency depreciation.

President Abdel Fattah El-Sisi is under increasing pressure to revive the economy, keep prices under control and create jobs to avoid a backlash from the public, Reuters reported.

Urban inflation rose for the fifth consecutive month to reach an annual 30.9%, the official CAPMAS statistics agency said on Monday, its highest point in more than three decades. However the rise from 30.2% in February was the smallest since Egypt abandoned its currency peg in November, driving up the price of imports.

Egyptian pound has since depreciated by roughly half and in Egyptian cities and towns, food and beverage inflation reached 41.8% year on year in March.

Annual core inflation, on the other hand, declined for the first time in eight months, reaching 32.25% in March from 33.1% in February, the central bank said in a statement.

“The deceleration in core inflation is in line with the expected headline deceleration in March,” said Reham El Desoki, senior economist at Arqaam Securities.

“March 2017 was a month void of significant inflationary pressures, where price rises slowed and a lower customs dollar rate stabilized the cost of imports,” El Desoki said.

Egypt abandoned its currency peg of 8.8 to the US dollar on Nov. 3 but the pound has been stable around 18 per dollar for the past two weeks.

March’s annual urban consumer inflation figure is the highest since June 1986, when it reached 35.1%, according to Reuters data. However, monthly urban inflation eased to 2% in March from 2.6% in February.

The central bank accompanied the November float with a 3% interest rate hike to fight price pressures but inflation is expected to keep climbing as the government pushes on with economic reforms, including fuel subsidy cuts.

The economic reforms helped Egypt secure a $12 billion loan program from the International Monetary Fund in November.

Egypt’s central bank has held interest rates steady at four monetary policy meetings since the currency flotation although some economists expect further rate hikes this year.



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