Why Egypt’s inflation declined in April 2023? CBE explains

Hossam Mounir
5 Min Read

The annual headline urban inflation decelerated to 30.6% in April 2023 from 32.7% in March 2023, marking the first decline since June 2022. Given a strong monthly rate in April 2022 relative to the typical pattern, the deceleration in April’s annual headline inflation in 2023 is basically attributed to favourable base effects. 

Annual food inflation dropped from 62.9% in March 2023 to 54.7% in April 2023 while annual non-food inflation remained largely stable.

Favourable base effects also had an impact on annual core inflation which decelerated for the second consecutive month to record 38.6% in April 2023 from 39.5% in March 2023. Monthly core inflation recorded 1.7% in April 2023, compared to 2.4% in April 2022 and 2.5% in March 2023.

Monthly headline urban inflation continued to decelerate in April 2023 to record 1.7% down from 2.7% in March 2023, and was equally driven by food and non-food items. 

Despite a monthly deceleration in food inflation, food prices increased, reflecting higher prices of core and volatile food items (mainly red meat, fish, and fresh vegetables) in line with their seasonal pattern. Additionally, the prices of regulated items increased to reflect a hike in tobacco prices announced by Eastern Company on 26 March 2023. 

Furthermore, the rise in Retail prices was mostly caused by higher prices of clothing and footwear reflecting the seasonal impact of Eid El Fitr, as well as higher prices of gold, among other items. Finally, higher prices of Services were mostly driven by expenditure on cafes and restaurants. 

Nationwide, the annual inflation declined to 31.5% in April 2023 from 33.9% in March 2023. 

Additionally, rural annual inflation declined to record 32.3% in April 2023 from 35.2% in March 2023. 

Prices of fresh fruits declined by 3.1% while fresh vegetables increased by 4.0%. Together, they contributed by 0.08% to monthly headline inflation.

Prices of poultry and eggs declined by 1.7% and 4.2%, contributing by – 0.12% and – 0.08% to monthly headline inflation, respectively. This marks the first decline in poultry and egg prices since August 2022, which may suggest an ease of the transitory supply disruption that was affecting them.

Prices of red meat increased at a slower pace (4.5%) to contribute by 0.24% to monthly headline inflation.

In line with its seasonal pattern, prices of fish and seafood increased by 7.6%, contributing by 0.21% to monthly headline inflation.

Prices of market rice increased by 15.9% for the third consecutive month, contributing by 0.25% to monthly headline inflation. The increase comes in line with the removal of price-mandated caps by the government in mid-February 2023. 

Prices of dairy products increased by 1.4% after peaking at 10.4% in January 2023, contributing by 0.06% to monthly headline inflation.

Prices of other core food items including pasta, fats, and sugar, tea, among others, increased to contribute by 0.20% to monthly headline inflation.

Prices of regulated items increased by 1.5%, to contribute by 0.30% to monthly headline inflation. This was mainly due to the announced price increase in tobacco prices.

Prices of services increased by 1.0%, contributing by 0.30% to monthly headline inflation. This was primarily due to higher expenditure on restaurants and cafes, rents, outpatient services, and haircuts.

Prices of retail items increased by 1.8%, contributing by 0.23% to monthly headline inflation. This was mainly due to an increase in the prices of personal care products, household appliances, cleaning products, clothing and footwear, and gold. 

Monthly core inflation was affected by price changes of the aforementioned core CPI items, Core food items, services, and retail items contributed by 1.01%, 0.41%, and 0.31% to monthly core inflation, respectively.

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