The Media Center of Egypt’s Cabinet said that the country’s inflation rate recorded during 2020 is its best level in 15 years, despite the novel coronavirus (COVID-19) crisis.
In a report, the centre clarified that reducing the inflation rate and maintaining it within the target range of the Central Bank of Egypt (CBE) has been one of the basic objectives of the monetary policy adopted by the state.
This is particularly relevant given its direct repercussions on the rate of economic growth, the standard of living for citizens, and its role in attracting local and foreign investments.
The report indicated that the government has succeeded in bringing down the inflation rate to a record level, thanks to controlling food prices. It means that the annual average of inflation in 2020 achieved its best rate since 2006, at 5%.
The report stated that the decrease in the annual average rate of general inflation in 2020 is due to the record negative rates of food prices, or a decrease in prices, in seven months.
They recorded a decrease of 0.7% in October, 2.6% in September, and 4.1% in August. This came alongside 1.5% in July, 0.7% in May, 1.7% in March, and 0.9% in February, according to the rates of change on an annual basis.
The report indicated that the effective economic policies under the economic reform programme implemented from 2016 to 2019 contributed to achieving the CBE’s targets for the rate of inflation. As a result of these policies, it recorded 5.2% in the fourth quarter (Q4) of 2020, 3.8% in Q3, 5.4% in Q2, and 5.9% in Q1 of 2020.
The report pointed out that inflation achieved a better rate than the expectations of major international institutions during 2020, as it recorded 5%. Meanwhile, The Economist had expected it to reach 5.6%, while Fitch and Bloomberg expected it to reach 5.9%.
In a related development, inflation recorded 5.7% in fiscal year (FY) 2019/20, while the World Bank expected inflation to record 9.5%, the International Monetary Fund (IMF) expected 5.9%, and Standard & Poor’s 6%.
The report also dealt with the most prominent evaluations of international institutions for the performance of the inflation rate. The World Bank stated that the inflation rate has continued to decline since the beginning of FY 2019/20, registering an average of 5.7% compared to 19.6% on average during the previous three years.
For its part, the IMF confirmed that the Egyptian government’s investments in modernising agricultural methods and food supply chains has led to a sustainable drop in food prices since October 2019.
Moody’s also confirmed that the decline in the inflation rate, in addition to the CBE’s rational monetary policies, have allowed for a further reduction in interest rates.
The report revealed the country’s success in controlling food prices, following the sharp and temporary rise in the inflation rate in 2017 due to the start of the economic reform programme, and the liberalisation of the exchange rate. It reviewed a number of commodity models whose prices decreased in December 2020 compared to December 2017.
The report indicated that Egypt achieved the largest annual decline in the inflation rate in emerging markets compared to the previous year.