Egypt’s annual urban consumer inflation rose to 13.1 per cent in April — the highest rate in nearly three years — from 10.5 per cent in March, data from state statistics agency Capmas showed on Tuesday.
Monthly inflation stood at 3.3 per cent last month, compared to 2.2 per cent in March, as food prices surged.
The uptrend is “aligned with global indicators” and “reflective of cost-push factors” including local currency weakness due to the recent devaluation of the Egyptian pound, as well as spiralling commodity costs and supply chain bottlenecks due to the Russia-Ukraine war, Naeem Brokerage said in a research note.
As the world’s top wheat importer, Egypt has been deeply affected by the war between Russia and Ukraine, the two countries it relies on for about 80 per cent of its wheat imports.
In March, the North African country raised interest rates and let its currency weaken by more than 15 per cent to try to mitigate the economic fallout.
Egypt expects spending to rise by 15 per cent in its draft budget for the fiscal year that starts on July 1 to support the sectors and groups most affected by the current economic crisis, Finance Minister Mohamed Maait said on Monday.
Food and beverage costs, the highest weight in the consumer price basket, increased 7.6 per cent month-on-month compared with 4.1 per cent in March. It rose 26 per cent on an annual basis.
On a monthly basis, vegetable prices jumped 29.5 per cent, fruit 12.7 per cent, fish and seafood 13.1 per cent, meat 5.2 per cent, and bread and cereals 2.4 per cent in April.
Other costs increased across the board, including for housing and utilities, transport and clothing.
Analysts expect higher inflation in the coming months, as well as further rate increases by Egypt’s central bank and further currency devaluation.
“Inflation will continue to rise over the rest of this year and prompt the central bank to hike interest rates further — we have pencilled in 350 bps [basis points] of hikes by the end of this year, to 12.75 per cent, which is more than the consensus expects,” London-based consultancy Capital Economics said.
Emirates NBD said in a research note it expects a 300 bps rise at the May 19 meeting, up from the previous expectation of 200 bps.
“This was the fastest pace of annual price growth since May 2019 … and makes more rapid tightening by the Central Bank of Egypt more likely at its rate-setting meeting next week,” the Dubai lender said.
Similarly, the US Federal Reserve increased its benchmark interest rate by half a percentage point last week, its biggest increase in 22 years, to try to contain rising prices.
Inflation in Egypt is likely to top out at about 15 per cent, Doug Bitcon, head of credit strategies at Dubai-based investment bank Rasmala, told Bloomberg TV last month.
