Egypt: Inflation declines to one-year low in January
Inflation came in at 29.8% in January, down from December’s 33.6%. January’s figure represented the weakest inflation rate in a year and came in below market analysts’ expectations. Looking at the details of the release, prices for food and non-alcoholic beverages rose at a softer pace in January, which outweighed prices for transportation increasing at a quicker rate. A high base of comparison also contributed to the headline print’s moderation.
Still, the trend pointed up, with annual average inflation rising to 34.1% in January (December: 33.9%). Meanwhile, core inflation fell to 29.0% in January, from December’s 34.2%, also below market expectations.
Lastly, consumer prices increased 1.63% in January over the previous month, picking up from December’s 1.39% rise. January’s result marked the highest reading since September 2023.
Our Consensus is for the disinflation process to continue throughout this calendar year (CY) and for inflation to average below 2023’s level in CY 2024. The delayed impact of elevated interest rates, soft GDP growth, a higher unemployment rate and a high base of comparison will contribute to inflation’s slowdown. That said, inflation will still be more than double the upper bound of the Central Bank of Egypt’s 5.0–9.0% target band and is not seen returning to target until Q4 2025.
Risks to the inflationary outlook are skewed to the upside, including a steeper-than-anticipated weakening of the Egyptian pound and higher import commodity prices amid the Red Sea crisis driving up global shipping costs. Moreover, higher demand ahead of the holy month of Ramadan—which begins on 10 March—and the 50% minimum wage increase announced in early February will add further upside pressure to prices.