Food security is still a significant problem, with Egypt buying 80% of its wheat from Russia and Ukraine.
Egypt‘s headline consumer price index decreased slightly from 23.4 percent in December to 243.5 points in January, reflecting an annual inflation rate of 23.2 percent, according to data released on Monday by the Central Agency for Public Mobilization and Statistics (CAPMAS).
Despite a recent decline, inflationary pressure remains. Monthly inflation increased by 1.6% in January after remaining unchanged in December. The cost of healthcare services rose by 4.6% month over month, while the food and beverages costs increased by 2.1%.
Food security is still a significant problem, with Egypt buying 80% of its wheat from Russia and Ukraine. The conflict has doubled the bread costs, and production and shipping costs have increased due to increasing global energy prices.
Data from the country’s Central Agency for Public Mobilisation and Statistics reported that the main reason for inflation slowdown in Egypt is due to the 2.6 percent drop in vegetable prices between December and January and a 0.3 percent drop in the prices of fish and shellfish.
Meanwhile, the costs remained constant for telecommunications, healthcare, and education.
However, the report claimed significant price increases for essential items like meat and poultry increased by 5 percent, and bread and cereal costs increased by 1.3 percent.
Dairy, cheese, and eggs had a slight fain of 0.3 percent, while the oil and fats increased by 0.7 percent.
Fruits have the highest price spikes, rising 9.8 percent. These price increases were a significant factor in January’s monthly inflation of 1.6 percent, compared to a flat reading in December.
There were price increases in other categories as well. Hospital services increased by 1.4 percent, personal care products by 1.5 percent, furniture and home appliances by 0.6 percent, fuel, gas, and electricity by 0.1 percent, entertainment by 48 percent, and hotel services by 3.3 percent.
The cost of schooling stayed the same. Tobacco and alcoholic beverages increased by 29.5 percent, housing, utilities, and gasoline by 18.7%, healthcare services by 40.5%, and transportation by 33.6%.
The postal, cultural, and recreational services saw the highest annual increases, increasing 94.3 percent, 48 percent, and 39 percent, respectively.
Despite a minor slowdown in annual inflation, Egyptian consumers and businesses find it very challenging to handle the high food and transportation costs.
The increasing costs of essential food items like cooking oil and wheat continue to strain consumer purchasing power.
Analysts anticipate that the country will face inflationary pressure for the foreseeable future due to domestic supply chain restrictions, global commodity price patterns, and currency volatility.
Since the Egyptian pound faced a significant depreciation, it has increased the costs of imports for goods, especially food and energy.
The Egyptian government has responded to the problems by enacting policies like putting price restrictions and subsidies for essential items to keep inflation under control and help the most needy people in society.
They have also negotiated import agreements and expanded their government-backed distribution of essential items to keep food supplies stable.
The Central Bank of Egypt (CBE) has increased the interest rates by more than 1,000 basis points since 2022 to support the pound.
These initiatives might counterbalance the structural economic reforms, such as the removal of subsidies and attempts at fiscal consolidation under Egypt’s larger economic agenda.
Since there are a lot of ongoing economic changes and external pressures, Egypt’s economic trajectory will closely watch the trends in inflation.
The policymakers will likely adjust the fiscal and monetary policies as needed to balance the growth and price stability, as the country is trying to navigate international economic uncertainty and funding challenges.
The central bank will also manage the interest rates in the coming months, which will play a significant role in combating inflation.
