Policymakers and people all throughout the world have long been concerned about inflation. It refers to the average price level of a basket of goods and services over time in an economy. Several variables, including supply and demand, currency exchange rates, and economic policies, can affect this price level (IMF, 2021). Low inflation might signal sluggish economic progress, while high inflation can undermine purchasing power and cause economic instability (World Bank, 2021).
Egypt has experienced serious problems with inflation in recent years. Numerous economic reforms and structural changes have been made in the nation, including the establishment of a value-added tax and the deregulation of the currency rate (IMF, 2020). These actions have increased the cost of numerous goods and services while also aiding in the stabilization of the economy and luring foreign investment (Government of Egypt, 2021).
Egypt’s inflation peaked in 2017 at above 30%, fueled in part by a lack of foreign money and a failing agricultural industry (Central Bank of Egypt, 2017). This resulted in a great deal of public unhappiness and several protests as many Egyptians battled to make ends meet in the face of growing prices (BBC, 2018). As a result, the government put in place a range of steps to reduce inflation, including reducing subsidies and enacting price limits on specific items (Government of Egypt, 2018).
Despite these efforts, inflation in Egypt has remained high in recent years. According to data from the Central Bank of Egypt (2020), inflation stood at around 9% in December 2020, down from a peak of over 30% in 2017 but still well above the central bank’s target of 4-6%. This has led some experts to question whether the government’s efforts to address inflation have been effective (Al-Monitor, 2021).
The government’s need to strike a balance between conflicting agendas has been one of the biggest obstacles in its efforts to reduce inflation. On the one hand, actions like reducing subsidies and raising taxes can help in the near term to lower demand and stabilize prices (IMF, 2020). However, these policies may also be unpopular with the general populace and may have detrimental effects on social welfare and economic development (World Bank, 2021).
Despite these obstacles, there are indications that the government’s initiatives to control inflation may be beginning to pay off. Inflation has been on the decline recently (Central Bank of Egypt, 2020), and the central bank has indicated that it anticipates prices to keep down in the months to come (Al-Monitor, 2021). For many Egyptians who have faced with price increases in recent years, this may come as a pleasant respite.
Although it is challenging to say for sure whether Egypt’s inflation has peaked, there are indications that the government’s efforts to stabilize prices may be beginning to bear fruit. But a lot will depend on a number of variables, such as how well the government’s economic policies are working and how the global economy is doing. Finding a balance between the need to fight inflation and the need to promote economic expansion and social welfare will be crucial, as it usually has been.
This was not written by Thndr and this is not investment advice, you should do your own research before making investment decisions.