The latest data from Egypt’s CAPMAS showed that annual urban inflation accelerated to a four-year high of 16.2% in October and economists expect it to rise further in 2022 when the impact of the devaluation of the pound filters through.
Naeem Brokerage said in a note that the annual consumer-price index jumped 16.2% in October from 15% a month earlier driven by a 23.8% increase in food and beverage costs, school tuition fees and a noticeable jump in the recreation & culture index.
Monthly also inflation climbed to 2.6%, from 1.6% in September. Egypt has been hit by the knock-on effect of global commodity price rises that accelerated amid the ongoing war in Ukraine, though the authorities in the Arab world’s populous nation have unveiled plans to absorb some of that impact.
Meanwhile, Fitch Ratings downgraded the North African’s outlook saying weaker external liquidity and reduced prospects for access to bond markets leave the country vulnerable to global shocks. The rating agency changed its outlook to negative from stable but affirmed Egypt’s B+ ranking.
Fitch also cited a decline in the country’s foreign reserves this year, saying the Central Bank of Egypt reserves were down to less than $32 billion by October from $35 billion in March and $40 billion in February though they have stabilised in recent months.
The agency sees the current-account deficit narrowing to 3.1% of the gross domestic product in the financial year that ends in June 2023, driven by higher shipping fees from the Suez Canal and a recovery in tourism.
Last month, the International Monetary Fund reached a preliminary agreement with the Egyptian authorities, paving the way for the Arab world’s populous nation to access a $3 billion loan with as much as $5 billion more expected to come from international partners.