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Egypt’s Inflation Expected to Drop in January: Analysts Predict Continued Decline Amid Economic Stability

Economic Analysis – Inflation Trends in Egypt

Recent findings indicate a notable calm in inflation rates across Egyptian cities for January, with projections suggesting a record decline in February. A survey incorporating insights from ten analysts and economists affiliated with investment firms and banking institutions within Egypt revealed a consensus on the expectation that inflation would experience a downturn, projected at approximately 1.5% on an annual basis for January.

Key contributors to this anticipated stabilization include a steady exchange rate and the effects of the baseline year, both of which are believed to significantly support a reduction in inflation levels. Notably, inflation rates in January of the previous year were recorded at 29.8% annually. The easing of geopolitical tensions in the region is also expected to have a positive impact on the overall climate of the Egyptian economy.

Data from the Central Agency for Public Mobilization and Statistics shows that annual inflation rates in Egyptian cities decreased in December 2024, registering at 24.1%, down from 25.5% in November.

Heba Mounir, a macroeconomic analyst at HC, anticipates that inflation in January will record 22.8%. She noted that despite fluctuations in the prices of certain building materials and relatively high telecommunications services, the stabilization of medicine and food prices is likely to contribute to a continued slowdown in inflation, given that these categories carry significant weight in the inflation index.

Mohamed Al-Najjar, the director of the debt tools unit at Nir Consulting Company, predicts that inflation will decline to around 23% in January, bolstered by multiple factors including stable food commodity prices and a lack of substantial demand during the month, along with a relative appreciation of the Egyptian pound against the dollar.

Looking ahead, survey participants foresee a sustained slowdown in inflation throughout the first quarter of this year, particularly in February, when a peak in the decline of inflation acceleration rates is expected.

Sarah Saadeh from CI Capital suggests that inflation rates could decrease by 1% annually in January, aided by the underlying effects of the baseline year, with significant declines anticipated in February, possibly reaching as much as 10% for that month.

Saadeh also cautioned that inflation rates in Egypt could see monthly increases if fuel prices rise, although it is expected that the overall inflation levels will remain below the 20% threshold for the current year.

Rania Yaqoub, Chairwoman of Threy Way for the Trading of Securities, forecasts a marginal decline in inflation rates for January, estimating a reduction not exceeding 0.5% annually. She believes this trend will persist into the first quarter of the year, potentially creating an opportunity for reduced interest rates.

The Egyptian Ministry of Planning and International Cooperation anticipates a notable decrease of nine percentage points in inflation by February 2025, attributed to the favorable influence of the baseline period from February 2024.

Regarding the inflation trajectory in the second quarter of 2025, survey respondents expressed optimism, predicting a continued decline in inflation rates from April to June, contingent on global inflation trends and local exchange rate stability.

Banking expert Mohamed Abdel-Al asserts that inflation is likely to exhibit a mild downward trend in January, between 1% and 1.5%. He emphasizes that maintaining this slowdown in the second quarter will depend heavily on the stability of global commodity prices.

The Central Bank of Egypt projects a significant reduction in inflation starting in the first quarter of this year, driven by the cumulative effects of cash-tightening measures and the positive implications of the baseline period, with expectations that inflation could approach single-digit figures by the second half of next year.

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