Egypt: Inflation reaches multi-decade high in February, monthly change in prices decelerates
March 9, 2017
In February, urban consumer prices rose 2.6% from the previous month. Although this represents the fourth sizeable consecutive jump in prices since the Central Bank abandoned the Egyptian pound’s peg to the U.S. dollar in early November, February’s reading was notably below the 4.1% increase observed in January, which suggests that the aftershocks from the decision may be starting to fade.
Inflation came in at 30.2% in February. The reading was above the 28.1% figure seen in January and marked the highest inflation level observed since November 1986. Inflation has accelerated on the back of the flotation of the pound, the scrapping of several subsidies on regulated goods and the introduction of a new Value-added Tax. A weakened currency has eroded Egyptians’ purchasing power and has prompted prices of imported goods to spike, while the removal of subsidies has caused supply shortages and widespread discontent. On the flipside, tough economic reforms have restored investor confidence in Egypt, with U.S. dollars pouring steadily into the country and international reserves rising to a multi-year high.
Annual average inflation rose from 15.3% in December to 17.1% in January, reaching the highest figure in over seven years.
Author: David Ampudia, Economist