Egypt’s Inflation Rate Drops to 32.5 Percent in April
In a surprising turn of events, Egypt’s annual urban consumer price inflation rate decreased to 32.5 percent in April, slightly lower than analysts’ expectations. This drop from 33.3 percent in March marks a positive trend in the country’s economy, as reported by the statistics agency CAPMAS.
Monetary Policy Tightening and IMF Support
The central bank’s decision to tighten its monetary policy by hiking interest rates by 600 basis points on March 6 has had a significant impact on inflation. This move was made in conjunction with signing an $8 billion financial support package with the International Monetary Fund, which also led to a depreciation of the currency.
Egypt has pledged to the IMF to continue tightening its monetary policy if necessary to safeguard the purchasing power of households. Additionally, the government has increased fuel prices as part of its commitment to the IMF, further stabilizing the economy.
Private Sector Contraction Continues
Despite these positive developments, Egypt’s non-oil private sector saw a contraction in April, with the S&P Global Purchasing Managers’ Index falling to 47.4. This marks the 41st consecutive month below the growth threshold of 50.0.
While the employment sub-index declined, the output sub-index and new orders index showed improvement. Business sentiment also saw a boost, with future output expectations on the rise.
Fitch Revises Egypt’s Outlook to Positive
In a vote of confidence for Egypt’s economy, global ratings agency Fitch revised the country’s outlook to positive from stable. This decision was based on reduced external financing risks and an increase in foreign direct investment.
Foreign investors have shown interest in Egyptian treasury bills since the announcement of the IMF loan program, leading to a shrinking net foreign assets deficit. Fitch believes that efforts to contain off-budget spending will help reduce public debt sustainability risks in the future.