Egypt’s annual urban consumer price inflation slowed to 4.7% in May from 5.9% in April, the official statistics agency CAPMAS said on Wednesday.
The North African country of 100 million people is facing economic repercussions from the spread of the new coronavirus, which essentially shut down its vital tourism sector from mid-March.
Egypt also imposed a nightly curfew, closed schools and universities, and shut restaurants and cafes to slow the spread of the disease.
The May inflation rate dropped as food and beverage costs declined 0.3% year-on-year, CAPMAS data showed, reflecting a drop in demand during the Muslim holy month of Ramadan, when it normally surges.
Core inflation, which strips out volatile items such as food, fell to 1.5% year-on-year in May, from 2.5% in April, the central bank said on Wednesday.
Month-on-month urban inflation registered 0%, CAPMAS said.
“From a monetary policy angle, this is considered good news because it ensures stability for interest rates going forward. However, month-on-month inflation could start going back up in June and July,” said Allen Sandeep, head of research at Naeem Brokerage.
The International Monetary Fund in May approved $2.77 billion in emergency financing to help Egypt grapple with the new coronavirus pandemic through its rapid financing instrument.
Egypt then reached a staff-level agreement with the lender for a one-year, $5.2 billion standby loan, which the IMF’s executive board is expected to consider in the coming weeks.
“Subdued inflation, in addition to the news that the authorities have reached a staff-level agreement with the IMF for a one-year $5.2bn stand-by arrangement, means that the environment is becoming much more conducive for the central bank to resume its easing cycle over the coming months in order to support the struggling economy,” Capital Economics said in a note on Wednesday.