In February, Egypt’s annual urban consumer price inflation plummeted to 12.8% from 24.0% in January, surpassing analyst expectations. Month-on-month, prices increased by 1.4%, with food and beverage prices rising 3.7% year-on-year. Key economic strategies, including currency devaluation and an IMF support package, have contributed to this decline in inflation rates.

In February, Egypt’s annual urban consumer price inflation declined significantly to 12.8% from 24.0% in January, according to data from the statistics agency, CAPMAS. This reduction in inflation was faster than analysts’ expectations, attributed to the diminishing impact of exceptionally high price increases observed over the past two years.

Fifteen analysts surveyed by Reuters anticipated a median inflation rate of 14.5%, indicating a notable difference between projections and actual figures. Despite the year-on-year decrease, month-to-month prices rose by 1.4% in February compared to January. Notably, food and beverage prices recorded an annual increase of 3.7%, rising by 0.2% since January.

Inflation had consistently increased since early 2022, influenced by the geopolitical situation following the Russian invasion of Ukraine, which led to significant withdrawals by foreign investors from Egyptian treasury markets. Notably, headline inflation peaked at a record high of 38.0% in September 2023.

The surge in inflation was partly driven by a rapid expansion in the money supply, which rose to an unprecedented 32.1% year-on-year by the end of January, per central bank data. Additionally, a year prior, the Egyptian government significantly devalued its currency and raised interest rates by 600 basis points, alongside securing an $8 billion financial support package from the International Monetary Fund, aimed at stabilizing the nation’s finances.

In conclusion, Egypt’s significant drop in annual inflation to 12.8% in February illustrates the effectiveness of recent economic measures taken in response to previous financial strains. The stabilization of prices, particularly in food and beverages, reflects the influence of the base effect and monetary policy adjustments undertaken in collaboration with international financial institutions. Overall, the economy is showing signs of recovery amidst ongoing challenges.

Original Source: www.zawya.com

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