1. Demand-Pull Inflation:
‍Demand-pull inflation happens when demand for goods and services exceeds their supply, leading businesses to increase their prices. The main causes of demand-pull inflation in any country can include factors such as strong consumer spending, increased government expenditure, or expansionary monetary policies. In 2023, many Egyptians responded to the inflation and currency devaluation with a ‘yolo’ mindset, they worried that prices will only keep increasing, making people feel like they’re racing against the inflation clock, and so they hurried to buy things they want or think they might need, increasing demand. While demand-pull inflation can be a sign of a growing economy, there are additional factors at work in Egypt’s case. It gives us much insight on our spending habits as Egyptians where we complain about the surge in prices yet continue to buy just the same or perhaps even more, sometimes even without having the money and resorting to buying through installments.

💪 How can individuals help reduce demand-pull inflation?
‍Practice being more mindful with your spending and understand the gravity of your purchasing power. A great example on the collective individual power to alter prices is the boycott of soft drinks which took place as a response to the humanitarian crisis in Gaza - we saw big sales and discounts on these products to encourage and incentivize people to buy them once again after the boycott started to take effect and demand dropped.


‍2. Cost-Push Inflation:
‍Cost-push inflation occurs when the cost of production for goods and services increases, leading to higher prices. Some of the contributing factors to cost-push inflation in Egypt include rising wages, increased energy costs and the currency devaluation which raises the prices of all imports.

💪 How can individuals help reduce cost-push inflation?
‍While the government plays a role in managing cost inflation, we as individuals also play a big part in managing cost-push inflation by purchasing local alternatives and encouraging domestic production in order to reduce reliance on imports , especially now when our currency is facing a harsh devaluation.


‍3. Imported Inflation:
‍Imported inflation is particularly dangerous as it has profound effects on several areas of the economy including currency devaluation. Importing goods requires foreign currency, which increases the demand on that currency. In effect, this fuels the devaluation of the Egyptian Pound, especially when Egypts ranks low in its production and exports. It also becomes problematic when rates of inflation outside of Egypt are high, as was the case following the pandemic. The cost to import these goods increases due to their cost in USD increasing besides the impact of Egypt’s weakening currency. Imported inflation affects cost-push inflation, and as we’ve seen, the latter fuels demand-pull inflation.

💪 How can individuals help reduce imported inflation?
‍Although the government plays a role in exchange rate management through its central bank and through trade policies, individuals play an equally important role in curbing imported inflation. The answer is simple, and the good news is, we’re already doing it, thanks to the boycotting of foreign goods currently taking place. What we can do, scratch that, what we are already doing is buying local alternatives instead of the imported products we were used to buying. We’re encouraging local businesses and spending more of our money on the local  value chain (explained in previous blog post), which supports Egyptian labor and enables our economy to grow by reducing inflation because money is being reinvested in Egypt.

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This period of economic instability affects us in more ways than we think, and it is every individual’s responsibility to become aware and conscious of the ways it influences them in order to regain control and make positive changes and adjustments.

❤️‍🩹 Emotional Impacts

‍Decreased purchasing power leads to feelings of frustration, dissatisfaction and demotivation which can go all the way to influencing one’s motivation to work and be productive and that may lead to impulsive and irrational decisions, driven by these negative emotions.

‍Increased costs of living leads to financial anxiety and stress. When we start to worry about making ends meet, we live in a state of financial insecurity that represents a threat to our wellbeing and can affect the quality of our day, our relationships, our health as well as our tolerance and resilience levels.

‍Reduced savings and investments leads to feelings of unfairness and some may even begin to feel like victims of economic instability. This is particularly dangerous because these feelings of helplessness that result from uncertainty in making or trusting our decisions do stand in one’s own path to growth, both as an individual and financially.



🧠 Mental Impacts

‍Decision-making challenges: Inflation can make financial decision-making more complex due to uncertainties and feelings of doubt. It is also very hard to maintain a positive mindset and manage our emotions in a healthy manner during times of economic turbulence.

‍Reduced trust in the economy: Persistent or high inflation rates can erode people's trust in the stability and reliability of the economic system. This can have broader implications for social cohesion and people's confidence in the future and their motivation levels.We know that the times are really troubling and that it may sometimes be hard to see a way out. 2023 has been a tough year and it challenged us in many ways, but it is important to understand how it’s affecting us in order to mitigate it effectively with awareness. If we give in to our very valid but negative and pessimistic emotions, we risk making bad decisions that will worsen the problem and make it last for longer periods. However to give you a starting point, Flash has put together a list of things you can do.

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1. Don't avoid the problem. Instead, build mental resilience through these measures:
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- Focus on educating yourself in financial matters such as budgeting, saving, investing, and managing debt. This will improve your financial awareness and capacity to make informed decisions -  you will feel empowered.

- Stay Informed and keep yourself updated on economic trends, inflation rates, and currency devaluation and understand how these factors can impact your financial situation.

-  Seek Professional Advice by consulting with financial advisors or experts who can provide guidance on managing your finances during tough economic conditions if your uncertainty is affecting your capacity to make decisions.


2. Build financial resilience through these measures:

- Track your expenses to identify areas where you can cut back on your expenses - you’ll be surprised at what a lavish spender you’ll probably turn out to be.

- Prioritize essential expenses and create a budget that accommodates them.

- Establish an emergency fund that would cover unexpected expenses, perhaps aim to save 3-6 months’ worth of living expenses as per your budget. This will give you a feeling of security.

- Reduce high-interest debt and avoid taking on new debt. Instead, practice conscious and mindful spending by asking yourself questions like:
“Do I really need this item or is it an impulse buy?”
“Will I regret making that purchase soon after or before completing its installments?”
“Is this purchase an investment in myself or my future?”
“Why do I want to make this purchase? Is there a reason that holds value?”

- Diversify your income if possible. Nowadays there are many alternative ways to make money from a side hustle. Explore passive income options that may be of interest to you.


3. Build emotional resilience and prioritize self-care:
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- Share your concerns and feelings with your family, partner and/or people who provide you with comfort and support. You’ll be relieved to find others feel the same as you do.

- Engage in activities that help you destress and feel grounded, present or joyful. Do more of what you love, it is a necessary ingredient in life.

- Explore somatic practices such as breathwork, movement therapies and practicing mindfulness, or meditations that may interest and comfort you.

- Focus on your goals instead of the reasons that make them hard to achieve - there will always be challenges. To achieve that you must first know what your goals are, set realistic short-term and long-term milestones and allow your goals to be your source of motivation.

- Practice having a flexible mindset, it will help you adjust with more ease to changes that occur by realizing and seeking opportunities, as well as reviewing your goals and progress regularly adapting your strategies and plans as needed.

Use whatever tools that resonate with you from the above to help yourself maintain a positive mindset that enables you to take command of your life and make informed decisions that enable you to take an active role in shaping your future.



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Want to optimise your spendings but embarrassed to ask your friends how much
they spend on their bills?
Download Flash app to know how much others are spending. Our benchmarks section will let you know if you’re within average, above average or below it.