Egypt’s annual urban consumer price inflation rate declined to 32.5 percent in April, down from 33.3 percent in March.
According to data from the country’s statistics agency CAPMAS, this decrease was slightly greater than what analysts had predicted. In April, prices increased by 1.1 percent compared to a 1.0 percent increase in March.
Although food prices dropped by 0.9 percent in April, they remained 40.5 percent higher than the previous year.
A survey of 17 analysts had anticipated that annual inflation would decrease to a median of 32.8 percent, continuing the downward trend that began in September when inflation reached its peak at 38.0 percent.
In an effort to prevent further erosion of households’ purchasing power, the Central Bank tightened its monetary policy by raising interest rates by 600 basis points on March 6.
On the same day, Egypt signed an $8 billion financial support package with the International Monetary Fund and allowed its currency to depreciate.
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As part of its agreement with the IMF, Egypt pledged to resume tightening measures if necessary.
Additionally, the government raised the prices of various petroleum, diesel, and other fuel products last month as a commitment to the IMF.
Persistent high inflation
Inflation has remained high over the past year, largely driven by the rapid growth in the money supply.
Meanwhile, Egypt’s non-oil private sector continued to contract in April, with the S&P Global Purchasing Managers’ Index falling from 47.6 in March to 47.4.
This marks the 41st consecutive month below the threshold of 50.0, which indicates contraction rather than growth.
The employment sub-index decreased from 50.8 in March to 49.7 in April, according to the rating agency.
However, the output sub-index improved from 44.5 in March to 44.8 in April, and the new orders index increased from 45.0 to 45.5.
Business sentiment also improved, as reflected in the future output expectations index, which rose from 52.2 in March to 55.3 in April.
Fitch upgrades Egypt’s outlook to positive
In addition, global ratings agency Fitch recently upgraded Egypt’s outlook from stable to positive.
The agency affirmed Egypt’s rating at ‘B-‘, citing reduced risks in external financing and increased foreign direct investment.
Since the announcement of the IMF loan program, foreign investors have invested billions of dollars in Egyptian treasury bills.
As a result of these investments and support from the UAE, Egypt’s net foreign assets deficit decreased by $17.8 billion in March.
Fitch noted that initial measures to control off-budget spending should contribute to reducing the risks associated with public debt sustainability.
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