Egypt’s economy impacted by rise in inflation

CAPMAS, the Egyptian statistics office, has released data showing that the nation’s annual urban consumer price inflation has surged higher than expected in January, reaching 25.8%, the highest rate in over five years.

This spike follows a series of currency devaluations, a shortage of foreign currency, and ongoing delays in importing goods. The devaluation of the Egyptian pound, which has declined by approximately 50%, since March, is continuing to put a strain on the nation’s limited foreign currency reserves, which have fallen to $34 billion in December 2022.

According to the Atlantic Council, economists predict that inflation will continue to rise in the coming months, putting further stress on low-income Egyptians who are already struggling to make ends meet. Approximately 30% of Egyptians live in poverty, making the situation a concerning one, with the potential for social unrest and political repercussions in the region.

Non-alcoholic drinks and food account for 32.7% of the index’s basket, however, the rise in headline inflation is attributed to manufacturers passing on increased import costs to consumers, according to Allen Sandeep of Naeem Brokerage. The overall prices increased by 4.7% from the previous month, driven by a 10.1% increase in food and beverage costs, as per Sandeep.

A recent report echoes these sentiments, with economists having expected a reading of 23.75%, according to a median forecast of 14. Five economists predicted that core inflation would increase from 24.4% in December to 26.6%. The central bank is expected to release the January data soon.