Egypt Inflation November 2016

Egypt

Egypt: Egyptian inflation soars to eight-year high in November

December 10, 2016

In November, consumer prices jumped 4.9% from the previous month, which was notably above October’s 1.7% increase and marked the highest monthly increase on record. The free floating of the Egyptian pound and the hike in regulated prices of subsidized fuels, both of which took place in early November, have greatly contributed to the build-up of inflationary pressures. According to the Central Bank, the spike was largely the result of higher prices for regulated items, particularly fuels and oil-related products, as well as for foods, beverages and apparel.

Inflation came in at 19.4% in November. The reading was well above October’s 13.6% and the highest reading in eight years. Since the pound was free floated on 3 November in compliance with IMF demands for the granting of a USD 12.0 billion loan, the value of the Egyptian currency against the U.S. dollar has halved. In turn, prices for imported goods and internationally-priced local commodities have gone up dramatically, which, coupled with the scrapping of fuel subsidies and a new value-added tax, is hurting Egyptians’ purchasing power.

Meanwhile, annual average inflation rose to 12.8% in November from 12.1% in October, which was the highest figure on record. Core inflation, which excludes volatile items such as regulated items, fresh fruit and vegetables, came in at a record-high 20.7% in November, markedly above October’s 15.7% log. The jump in core consumer prices indicates that the rippling effects of the pound’s liberalization have extended well beyond regulated and volatile items, hitting instead the entirety of the Egyptian economy.

November’s reading could tilt the Central Bank’s balance to raise interest rates ahead of the 29 December meeting. On 3 November, the Central Bank had already increased the interest rate by 300 basis points, but failure to contain price pressures could prompt a fresh hike of interest rates. FocusEconomics Consensus Forecast participants are gradually revising their forecasts in the wake of the floating of the pound, and they expect inflation to average 12.3% in calendar year 2016, which is up 0.3 percentage points from last month’s projection. For calendar year 2017, the panel sees average inflation of 13.0%, which is up 0.6 percentage points from last month’s estimate.


Author:, Economist

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Egypt Inflation November 2016

Note: Year-on-year and month-on-month variation of urban consumer price index in %.
Source: Central Agency for Public Mobilization and Statistics (CAPMAS).


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