(MENAFN - Gulf Times) Egypt's urban consumer prices rose the fastest in at least six years in December, fuelled in part by a 28.3% increase in food costs following the central bank's decision to abandon currency controls two months ago.
Annual urban inflation accelerated to 23.3% in December, while the monthly rate quickened to 3.1%, according to the state-run statistics agency, CAPMAS. The monthly rate decelerated from 4.8% in November.
The annual rate was the highest since Bloomberg started tracking the data in 2010. The government said the November 3 decision to free the exchange rate and raise fuel prices was imperative to revive the economy, but it was also expected to boost inflation. Economists had forecast annual consumer prices would rise more than 20% by the end of 2016.
High annual headline inflation is expected to continue for several years before dropping to single-digit levels by the end of 2019 or early 2020, Reham ElDesoki, senior economist with Dubai-based Arqaam Capital, said in a research note.
'Egypt now is in the eye of the policy restructuring cycle, and the price is higher inflation and an overall fiscal deficit pending a structural change in government spendg and general repricing of goods and services, she said. 'A reversal of over 50 years of comprehensive government support will take time and is a welcome change to put Egypt on a more sustainable path to growth and fiscal consolidation.
The reforms, which helped the nation finalise a 12bn International Monetary Fund loan, have created new hardships in the country of 92mn people, about half of whom live near or below the poverty line. The pound has lost more than half its value in a slide that officials have said is temporary and to be expected until a market equilibrium is achieved.
The flotation has allowed the banks to again step in and make hard currency available, in effect ending a dearth of dollars that had crippled business activity, officials have said.
Core inflation jumps to 25.86% in December
Egypt's annual core inflation jumped to 25.86% in December from 20.73% in November, the central bank said yesterday.
The jump is the second in as many months since the central bank ditched its peg of 8.8 Egyptian pounds to the dollar on November 3, floating the currency and allowing it to roughly halve in value.