Inflation rates drop in Egypt but Gaza war effects yet to bite

Inflation rates drop in Egypt but Gaza war effects yet to bite
Egypt's core and headline inflation rates fell in October, but analysts and bankers say the country's economy could yet take another big hit as Israel's war on Gaza persists.
2 min read
Egypt - Cairo
12 November, 2023
Egypt's inflation remains high compared to this time last year [Getty-file photo]

Egypt's annual inflation rates dropped in October compared to the month before, according to official data, despite an ongoing economic crisis in the country.

The annual headline urban consumer inflation rate fell in October to 35.8 percent, down from 38 percent the previous month, the state-run Central Agency for Public Mobilisation and Statistics (CAPMAS) said on Saturday.

The prices of essentials like grains, bread, fruit and vegetables had all fallen, while the prices of other goods remained stable, CAPMAS said.

Inflation had witnessed a steady surge over the previous months, reaching its fourth consecutive record high in September, according to a CAPMAS report.

The core inflation rate also fell, from 39.7 percent in September to 38.1 percent in October, Egypt's Central Bank said Sunday.

Despite the decline, inflation remains when high compared to the same month last year. Headline inflation stood at 16.2 percent in October 2022.

Meanwhile, bankers and analysts have warned that Egypt's struggling economy faces new risks as Israel's war on Gaza threatens to disrupt tourism bookings and natural gas imports.

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Egypt's government announced in October that it would suspend duties and customs on several goods for six months, ahead of presidential elections slated for December.

The election result has been viewed by analysts as "a foregone conclusion" for incumbent President Abdel Fattah al-Sisi, who competes against three uninfluential candidates, is expected to win a sweeping victory.

Egypt is the world's largest importer of wheat, and its current economic hardships have been blamed on external factors such as the Russian war on Ukraine and the Covid-19 pandemic, which severely impacted global supplies of the foodstuff and other essential commodities.

In October 2022, the Central Bank of Egypt imposed exchange rate flexibility, allowing the value of the Egyptian pound to be regulated by market forces. The decision aimed to save Egypt's already ailing economy after securing a US$3 billion loan from the International Monetary Fund (IMF).