Egypt's headline inflation drops for second month running to hit 34.6% in November

Analysts expect the rate to fall further to 33% this month

Egyptian shoppers buy subsidised food at a consumer association market in Cairo. Reuters

Egypt's headline inflation dropped to 34.6 per cent in November, from 35.8 per cent the previous month, with the rate forecast to fall further by the end of this year.

The drop continues a two-month decline in Egypt’s inflation rate, down from September's record of 38 per cent, according to Egypt's Central Agency for Public Mobilisation and Statistics (Capmas).

The decline in the annual reading was "mainly a factor of the favourable base year contribution of - minus 2.5 per cent and a slowdown in monthly inflation", consultancy Naeem Brokerage said in its monthly analysis report.

Headline inflation came in slightly higher than predicted by the company, which had anticipated 33.6 per cent for November.

"The deviation from our estimate of plus 0.6 per cent month-on-month was predominantly explained by the tobacco index, which was up 15.7 per cent (versus our forecast of plus 1.0 per cent)," it said.

Egypt’s Parliament on October 30 approved amending its VAT law to impose a levy of 0.50 Egyptian pounds ($0.01) on tobacco products sold domestically. That has led a rise in the price of cigarettes.

The overall food and beverage index, representing 32.7 per cent of the urban consumer price index, increased by 0.2 per cent.

While the monthly prices dropped for vegetables (down 4.4 per cent), fruit (down 1.7 per cent) and meat and poultry (down 1.4 per cent), month-on-month rates rose for bread and cereals (up 4.1 per cent), dairy products and eggs (up 2.6 per cent) and other food products (3.7 per cent).

Prices of sugary products also rose sharply, by 7 per cent since a severe drop in sugar supplies had raised prices per kilo to a record 60 Egyptian pounds ($1.94).

Meanwhile, transport costs rose by 2.4 per cent last month following a 14 per cent rise in fuel prices applied on November 3, the second rise of the year.

Egypt’s fuel-pricing committee raised prices by 14 per cent in March.

That headline inflation dropped for the second month running was hailed as a positive sign for Egypt’s ailing economy, Naeem Brokerage said.

“Without the official hikes in the price of cigarettes and gasoline, monthly inflation would have slowed down to 0.5 per cent, the lowest since June 2022,” the company said.

It predicted headline inflation would drop to 33 per cent in December, driven again by the favourable base year contribution, which should “offset any unexpected spikes in monthly inflation amid further weakness in the Egyptian pound in the parallel market".