Egypt’s annual urban consumer price inflation eased to 13.0 percent in April from 14.2 percent in March, official statistics agency CAPMAS said on Thursday, the lowest reading since January.
Analysts suggested the drop was caused by the government upping supplies of food and vegetables to keep prices lower in the build-up to Ramadan – and inflation could rise next month.
Egypt has been carrying out an IMF-backed economic reform program since 2016 that saw inflation rise to a high of 33 percent the next year. It has since subsided, though rising fruit and vegetable prices have prolonged inflationary pressures.
“Based on our analysis, increased efforts made by the government to provide the market with ample supplies of volatile food items (fruits, meat and vegetables) prior to the Ramadan season has helped cool off the supply/demand pressures on inflation,” Naeem Brokerage, which predicted headline inflation would fall to 13.2 percent, said in a note on Wednesday.
Radwa El-Swaify, head of research at Pharos Securities Brokerage, said Thursday’s figure was lower than they had expected.
“This month was the lowest month-on-month increase in three years,” Swaify said. “We expect next month’s figures to see a rise between 0.5 and 1 percentage points and for current rises in vegetable prices to be reflected.”
Urban inflation rose 0.5 percent month-on-month in April, CAPMAS said, down from 0.8 percent in March.
As part of the IMF deal, Egypt is set to phase out remaining subsidies on most fuel in June, which could also add to inflationary pressures.
“We believe that the government is trying to have a rate cut sooner than expected and before the energy subsidy cut in June/July,” said Yara Elkahky, an economist at Naeem Brokerage.
After a surprise cut in February, the central bank’s Monetary Policy Committee (MPC) held rates steady at its March 28 meeting, saying the decision was “consistent with achieving the inflationary target of 9 percent” by the fourth quarter of 2020.
Core inflation, which strips out volatile items such as food, slowed to 8.1 percent in April from 8.9 percent in March, the central bank said.
Central bank policymakers, who target headline inflation at 13 percent plus or minus three percentage points, will have their next meeting on May 23.
CAPMAS said urban food and beverage prices saw a rise of 13.0 percent year-on-year and 0.5 percent month-on-month.
Millions of people in Egypt, the Arab world’s most populous country, live below the poverty line. They are struggling to meet basic needs after successive increases in the prices of vegetables, fruit, fuel and medicine.