Egypt’s Inflation Rate Declines Significantly in February 2024

Egypt’s annual inflation rate fell to 12.5% in February, down from 23.2% in January. This decline is attributed to a base effect relative to previous high inflation rates. The economy, heavily reliant on imports, is recovering from a crisis worsened by a foreign currency shortage. Significant international financial support is aiding this recovery.

According to recent official data, Egypt’s annual consumer inflation rate dropped to 12.5% in February, indicating a recovery from the country’s severe economic crisis. Although the inflation rate has declined steadily, analysts suggest that the significant drop from 23.2% in January primarily results from a base effect owing to previous extreme price increases.

Economist Wael el-Nahas explained that the lower current inflation rate appears inflated when compared to last year’s peaks of 36%, causing a misperception of improvement. The monthly inflation rate for February was 1.4%, a slight decrease from January’s 1.6%, as reported by the Central Agency for Public Mobilisation and Statistics.

Egypt’s economy, which is heavily reliant on imports, faced a crisis last year stemming from a severe shortage of foreign currency. This crisis led to daily price increases in consumer goods, particularly in urban areas. Following a recent currency devaluation in March 2024 and a substantial $50 billion bailout from the IMF, World Bank, and the UAE, signs of recovery have begun to materialize.

Since February 2022, the Egyptian pound has lost over 60% of its value, with inflation reaching approximately 40% in August 2023. In response, authorities have implemented several reforms, including three fuel price increases, as part of the IMF agreement that expanded from $3 billion to $8 billion. The IMF is anticipated to approve a $1.2 billion tranche after its fourth program review later today, and analysts believe that a new proposed loan agreement may exceed $1 billion.

In conclusion, Egypt’s annual inflation rate has decreased significantly, reflecting a gradual recovery from its economic turmoil. While the figures suggest progress, the analysis highlights that this is impacted by prior extreme inflation levels. Continued support from international organizations and economic reforms will be crucial in stabilizing the economy moving forward.

Original Source: newscentral.africa