Inflation Increases in March annually, albeit at slower pace

CAIRO – 10 April 2017: Egypt’s headline inflation increased in March to 30.9 percent year-on-year compared 30.2 percent in February, the highest rate in 30 years, the Central Agency for Public Mobilization and Statistics (CAPMAS) reported Monday.
March’s annual inflation rate however recorded the slowest acceleration pace since the Egyptian pound flotation.

Moreover, the monthly inflation rate continued to decelerate from 2.7 percent in February to 2.1 percent in March.

The CAPMAS report attributed the increase to a hike in the prices of fruits and vegetables by around seven percent, poultry and meat by 3.4 percent and fish by 10.6 percent.




Source: Thomson Datastream,CEIC, CAPMAS, Capital Economics



“Food prices account for 40% of the CPI basket and rose by 41.8% y/y in March, compared with 40.5% y/y in the previous month…Inflation in most other categories was unchanged or fell,” read a note by Capital Economics, a London-based macroeconomic research group.

Inflation has been on the rise in Egypt in the recent period after the Central Bank of Egypt’s (CBE) decision last November to float the Egyptian pound which saw the pound sliding to around EGP 18 to the dollar compared to EGP 8.8 before the float.

This came as part of the government’s reform program, started in 2014, to trim the budget deficit and acquire a $12 billion dollar loan from the International Monetary Fund (IMF).

The Capital Economics research note said that the sharp rise in inflation over the past few months can largely be attributed to the effects of a weaker pound as a 50 percent decline in the pound’s value against the dollar has pushed up the cost of imports and firms have been quick to pass the hit on to consumers.

Inflation was also exacerbated by the implementation of the value-added tax (VAT) and subsidy cuts late last year.

These effects, however, are likely to prove temporary and inflation will peak soon as evidence suggests that price pressures are starting to ease, said Capital Economics. Consequently, the research firm does not expect the CBE to tighten monetary policy further, as inflation starts to fall back later in the year.

Minister of Finance Amr al-Garhy said recently said that he predicted inflation to start easing by November or December. Deputy Finance Minister Ahmed Kouchouk said that he predicts to see inflation fall to an average of 15.2 percent during the 2017-2018 financial year

Following IMF’s managing director Christine Lagarde’s meeting with President Abdel-Fatah ِِAl-Sisi earlier this month, the IMF said that it was working with Egyptian authorities to bring inflation under control after recording a 30-year high on the back of implementing economic reforms.