Food prices sent Egypt's inflation to record 38% in September
In Egypt, annual headline inflation soared to 38% in September, marking the fourth consecutive month of record-high inflation figures in the financially strained North African nation. On a monthly basis, inflation rates continued their upward trajectory, rising by 2%, a pattern that commenced in March the previous year, according to the Central Agency for Public Mobilisation and Statistics.
The annual inflation increase slightly exceeded Goldman Sachs' prediction of 37.6%, as noted in its monthly forecast for Egypt. Goldman Sachs attributed this rise to seasonality and low inventories. Meanwhile, Core inflation, which strips out volatile items like food and fuel, retreated to 39.7% from 40.4% in August.
While most price increases were marginal, vegetable prices witnessed a substantial 19.2% surge, primarily due to decreased supplies following adverse crop harvests caused by one of the hottest summers on record. Fruit prices saw a more modest increase of 5.4%. Furthermore, bread and cereal prices decreased by 1.3% compared to August, continuing a trend that began in July.
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.