Egypt inflation slows more than expected in January
- Egypt's annual urban consumer price inflation decreased to 29.8% in January, lower than analysts' expectations.
- Month-on-month, prices saw a 1.6% increase in January, with food prices climbing by 1.4%.
- Over the year to January, food prices rose by 47.5%, showing a decline from the previous year.
Egypt's annual urban consumer price inflation decreased to 29.8% in January from 33.7% in December, as reported by the state statistics agency on Thursday. This figure was notably lower than analysts' expectations.
Month-on-month, prices saw a 1.6% increase in January, up from 1.4% in December. However, food prices climbed by 1.4%, a decrease from the 2.1% increase seen in December. Over the year to January, food prices rose by 47.5%, down from the 60.5% increase observed in the year to December.
Analysts had predicted a median of 32.5% for annual inflation, according to a Reuters poll. Egypt's inflation rate has been gradually declining since reaching a historic high of 38.0% in September.
The rapid expansion of money supply over the past two years has contributed to a swift rise in prices and a significant depreciation of the Egyptian pound, which has lost nearly 50% of its value against the U.S. dollar since March 2022. This significant devaluation reflects the challenges facing the Arab world's third-largest economy, characterized by a shortage of US dollars and escalating foreign debt. In response to these economic pressures, Egyptian banks have suspended all debit card transactions in foreign currency to curtail foreign exchange spending. In May, Fitch Ratings downgraded Egypt's outlook to negative—the country's first downgrade since 2013—citing a lack of economic reforms and fiscal system. Additionally, Moody's recently downgraded Egypt's credit rating by one notch, from 'B3' to 'Caa1,' over deteriorating debt affordability as a key concern. These rating downgrades underscore the country's economic difficulties and the need for substantial reforms.