Egypt’s yearly inflation decreased to 23.4% in December because food prices fell
Egypt’s inflation rate dropped to 23.4% in December, down from 25% the month before. This decrease was mainly because food and drink prices went down, according to official data released on Thursday.
Egypt’s inflation slows down
In December, food and drink prices, which are the biggest part of inflation, went down by 1.7% compared to the previous month, according to the Central Agency for Public Mobilization and Statistics (CAPMAS).
CAPMAS explained that this decrease was due to a 14% drop in vegetable prices, a small drop of 0.1% in meat and poultry prices, a 0.6% fall in fish and seafood prices, and a 0.7% decrease in dairy, cheese, and egg prices.
Although inflation in December was lower overall, there were still price increases in some areas, such as a 10.2% rise in communication costs, a 3.7% rise in healthcare prices, a 1% increase in clothing and footwear, and a 0.9% rise in housing costs.
Year-on-year, food and beverage prices in Egypt went up by 19.2%. Prices for culture and entertainment went up by 48.2%, transportation by 37.7%, and healthcare by 35%.
Egypt’s inflation has mainly been caused by an increase in the money supply (M2). M2, which includes cash and easily accessible deposits, grew by 29.06% in late November, just below the highest level of 29.59% in September of the previous year, according to the central bank.
Inflation started rising sharply in 2022 after Russia invaded Ukraine, causing foreign investors to pull billions of dollars from Egyptian markets. It reached a record high of 38% in September 2023, down from 21.27% in December 2022.
Subsidy Cuts
In March, Egypt agreed to a financial support deal worth $8 billion with the International Monetary Fund (IMF) to help reduce its budget deficit and manage inflation. As part of this deal, the government was required to cut subsidies on certain local goods, which has caused prices to rise.
In October, Egypt raised fuel prices by 9.2%, the third price hike this year, as part of efforts to reduce subsidies and lower the country’s financial burden. EFG Hermes, an investment bank in Cairo, predicts that the government may need to raise fuel prices by another 15-20% by late 2025 to fully eliminate subsidy spending.
To reduce subsidies, the government also increased the price of bread four times in June and recently raised electricity prices.
What to Watch For
Finance Minister Ahmed Kouchouk expects Egypt to receive the fourth payment of a $1.2 billion loan from the IMF this month. In a TV interview, Kouchouk said the IMF board will meet in January, and Egypt will receive the fourth payment during the same month. He also confirmed that Egypt has not asked for an increase in the $8 billion loan. However, the IMF said that the fourth payment still needs approval from its executive board.
Published: 10th January 2025
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