Egypt’s Inflation Slows Again—But Is the Crisis Over?

Egypt’s inflation rate has eased for the fourth consecutive month, dropping to 24% in January, according to data from the Central Agency for Public Mobilization and Statistics (CAPMAS). This marks a slight dip from December’s 24.1% and a 0.8 percentage-point decrease compared to January 2023, when inflation stood at 24.8%.

Despite this slowdown, prices remain significantly higher than a year ago. Food and beverage costs have surged by 20.2%, transport expenses are up by 33.6%, and entertainment prices have jumped by a staggering 48% year-on-year. Meanwhile, monthly inflation climbed 1.6% in January after being flat in December, with food prices alone rising by 2.1% month-on-month

The Factors Driving Egypt’s Inflation

Egypt’s inflation crisis has been fuelled by a mix of external and domestic challenges. The ongoing war in Ukraine has disrupted supply chains, leading to capital outflows from Egypt’s treasury markets. As foreign investors pulled billions of dollars, the Egyptian pound weakened, making imports more expensive.

Egypt’s inflation crisis has been fuelled by a mix of external and domestic challenges. The ongoing war in Ukraine has disrupted supply chains, leading to capital outflows from Egypt’s treasury markets. As foreign investors pulled billions of dollars, the Egyptian pound weakened, making imports more expensive.

On the domestic front, rapid monetary expansion has worsened inflation. Egypt’s M2 money supply grew by a record 31.07% in 2024, flooding the economy with excess liquidity. This, combined with a depreciating currency, has eroded purchasing power and kept inflationary pressures high.

Will Inflation Keep Dropping?
Egypt’s inflation crisis peaked at 38% in September 2023, prompting the Central Bank of Egypt (CBE) to take aggressive measures. Since early 2022, the bank has raised interest rates by over 1,000 basis points to tighten liquidity and stabilise the pound. At the same time, the government has turned to international lenders like the IMF and sought to attract foreign investments to bolster economic stability.

In a recent statement, the CBE acknowledged that inflation is on a downward path, stating: “With the gradual easing of previous shocks, inflationary pressures continued to subside, as annual headline and core inflation edged downward for the fifth consecutive month.” The bank also noted that the unwinding of food inflation and improving inflation expectations suggest that further declines could be ahead.

However, with persistent economic pressures and uncertainty surrounding global markets, the question remains: is Egypt truly on the road to recovery, or is this just a temporary dip in an ongoing crisis?