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Egypt Inflation Keeps Slowing as Foreign-Currency Crunch Eases - BLOOMBERG
BY , Bloomberg News
, CAPMAS
(Bloomberg) -- Egyptian inflation slowed in April for a second month, as greater availability of foreign exchange after a recent currency flotation appeared to ease some price pressures for the Middle East’s largest population.
Consumer prices in urban parts of the North African country grew an annual 32.5% compared to 33.3% in March, state statistics agency CAPMAS said Thursday. Prices increased 1.1% month-on-month.
Food and beverage prices, the largest single component of the inflation basket, increased an annual 40.5%, versus 45% in March. They declined 0.9% on a monthly basis in April.
Annual core inflation, the gauge used by the central bank that strips out volatile items, slowed further to 31.8% in April from 33.7% the month before.
The annual deceleration, broadly predicted by economists including at Goldman Sachs and EFG Hermes, suggests the worst may be over for Egyptian consumer costs in the wake of the pound’s dramatic depreciation of about 40% against the dollar in early March.
The move, which came after Cairo secured a historic $35 billion investment deal with the United Arab Emirates, helped seal an expanded loan program from the International Monetary Fund, but there’d been fears it would stoke inflation that was beginning to cool from a record high.
Read More: UAE’s $35 Billion Egypt Deal Marks Gulf Powers’ Buying Spree
Companies in Egypt are now reporting greater availability of foreign currency and there has been “a slowdown in purchase cost increases as local forex supply-demand imbalances unwind,” Phil Smith at S&P Global Market Intelligence said Wednesday in comments accompanying its latest Purchasing Managers’ Index survey. The rate of input-cost inflation plummeted in April to its lowest since March 2021, according to S&P.
Four devaluations since early 2022 have piled pressure on Egypt’s 105 million-plus people, forcing many households to cut consumption on food, clothing and other essentials. Authorities have enacted wage hikes, boosted interest rates to a historic high and pledged to monitor prices in bids to soften the blow.
There had been debate over how much the pound’s fall would impact prices. With Egypt having been embroiled in an almost two-year foreign-currency crunch, many goods had already been priced more in line with the currency’s much weaker value on the local black market. The devaluation closed the gap, essentially ending the parallel trade.
Cooling inflation came despite a March 22 hike in fuel prices, with the effect likely balanced by a recent government and private-sector initiative to limit the prices of key items like dairy and cooking oil, according to Mohamed Abu Basha, head of research at Cairo-based EFG Hermes.
The IMF’s latest estimate is for Egyptian inflation to slow to 15.3% by the end of June 2025, the conclusion of the next fiscal year. Its estimate is for 32.1% by the end of next month.
Egypt’s central bank is due to make its next interest-rate decision on May 23. The Monetary Policy Committee will probably hold steady for the next few months with a cut likely in the fourth quarter of 2024, Abu Basha said.
--With assistance from Tarek El-Tablawy and Abdel Latif Wahba.
(Updates with core inflation)
