Egypt’s headline inflation surges to new record of 36.5%

CAIRO (Reuters) -Egypt’s annual headline inflation rose to a new all-time high of 36.5% in July, in line with analysts’ expectations, as food prices soared, data from the country’s statistics agency CAPMAS showed on Thursday.

Month-on-month, prices rose 1.9% in July, down from 2.08% in June.

Core inflation, which strips out volatile items like food and fuel, eased slightly to 40.7% in July from 41% in June.

Prices have climbed rapidly during a foreign currency crisis that has triggered three devaluations since March 2022. Many Egyptians have seen their living standards slide.

Headline inflation was 35.7% in June, also a record high.

The median forecast of 15 analysts polled showed annual urban consumer inflation rising to 36.5% in July. The previous high of 32.95% was recorded in July 2017.

Food and beverage prices rose by an annual 68.4% in July, CAPMAS said.

“Food prices were mainly impacted by a 9.1% monthly increase in fruit prices and 4.8% in vegetable prices, which are largely volatile and are excluded from core CPI,” said Sara Saada of CI Capital, which had forecast July inflation of 35.4%.

“We expect inflation to average c.32% in 2023, with possible upside on the continuation of the implementation of deeper fiscal reforms, including possible higher electricity tariffs and approving new telecom tariffs,” she added.

The IMF in December approved a $3 billion, 46-month Extended Fund Facility loan for Egypt after the Ukraine crisis exposed vulnerabilities in its economy.

The first six-month review, scheduled for last March, has been delayed pending the government fulfilling a pledge to adopt a flexible currency exchange rate and to sell more state assets.

Noaman Khalid of NBK said an unfavourable base effect from last year continued to push inflation upwards, even though the monthly rate dropped to 1.9%.

“If policy makers devalue the currency in the coming period in preparation to the IMF review, inflation could peak at 40% at the end of the year. Otherwise it should drop to 30% by December,” said Noaman. NBK had forecast inflation at 36.5%.

(Writing by Clauda Tanios; Writing by Patrick Werr and Aidan Lewis; Editing by Christopher Cushing, Miral Fahmy, Alex Richardson and Sharon Singleton)