Egypt Economic Outlook
The economy likely lost steam in October–December 2022 relative to July–September, due to aggressive monetary tightening, a sinking pound, import controls and rising inflation. PMI data showed conditions in the non-oil private sector deteriorated at a steeper rate in October–December, while annual industrial production growth slowed in the same period. Heading into 2023, PMI data for the first two months of this calendar year suggests activity is muted. The pound is down around 20% year to date, spurring price pressures and undermining consumer purchasing power. Moreover, the lagged impact of last year’s 800 basis points of rate hikes will also be weighing on demand. In other news, on 7 February, Moody’s downgraded the country’s credit rating to ‘B3’ with a stable outlook on the back of dwindling external buffers and diminishing shock absorption capacity, boding poorly for borrowing costs.
Egypt Inflation
Inflation rose to 25.9% in January from December’s 21.3%. January’s result was the highest inflation rate since November 2017. The rise was primarily due to increasing price pressures for food and non-alcoholic beverages, as well as transport. The Consensus is for inflation to decelerate somewhat by year-end but to stay well in double digits, spurred by the weak pound.