Egypt urban inflation rises to 26.2% in August, first jump in five months
The unexpected increase in inflation comes as Egypt deals with the economic affects of the Red Sea attacks and a new cabinet in office.
Inflation in Egypt rose in August for the first time in five months, the government announced on Tuesday, in a potentially worrisome sign for the Egyptian economy.
Egypt’s annual urban consumer price inflation hit 26.2% in August, up from 25.7% in July, while annual headline inflation reached 25.6% in August after being recorded at 25.2% in July, according to the Egyptian government’s statistics agency CAPMAS. The rise is the first in five months.
Annual headline inflation was down on the year, however. The rate in August of 2023 was 39.7%.
The increase in inflation was largely driven by a 14.3% increase in vegetable prices and a 14.9% jump in transportation prices, according to CAPMAS.
Why it matters: The increase came as some surprise. Egypt’s state-owned news outlet Al-Ahram called the rise in annual urban consumer price inflation “unexpected.” A Reuters poll of analysts had predicted urban inflation in August would be 25.1%.
In July, the International Monetary Fund approved the release of $820 million in funds for Egypt. The IMF reported at the time that “inflationary pressures are gradually abating.”
The inflationary environment had previously been looking positive. In May, Egypt’s year-on-year inflation fell below 30% for the first time since January.
Egypt has been contending with inflation for years. More recently, the economy has been reeling from the Houthi attacks in the Red Sea. The Suez Canal’s revenue for the 2023/2024 fiscal year fell by more than $2 billion amid the attacks by the Iran-backed Yemeni group on international ships.
A new Egyptian cabinet took office in July, following the resignation of the last one the month prior. President Abdel Fattah al-Sisi instructed the next government to make “every effort to reduce rising prices and inflation” after the resignation.
What’s next: The Central Bank of Egypt kept its key interest rates unchanged at its meeting last week.
“With the gradual easing of previous shocks, inflationary pressures continued to subside,” the bank noted in its announcement.
The Central Bank will announce its next interest rates decision on Oct. 17.
