The inflation rate in Egypt is expected to see a decrease for the sixth consecutive month in August, largely due to a favourable base effect. However, analysts are warning that there may be a month-on-month increase as a result of recent government-led price hikes. The government’s decision to sign an $8 billion financial support package with the International Monetary Fund has led to inflationary monetary policies aimed at controlling inflation, but at the expense of raising domestic prices. Subsidised products have seen price hikes as the government attempts to tackle a widening budget deficit.
According to predictions from 19 analysts, urban consumer inflation is estimated to have slowed to a median of 25.1% in August from 25.7% in July. Analysts like Heba Mounir of HC Securities expect urban inflation to decelerate to 24.9% year-on-year in August due to a favourable base effect. However, there is an anticipated 1.0% month-on-month increase attributed to recent hikes in energy and transportation costs at the beginning of August. Naeem Holding, on the other hand, forecast annual headline inflation of 24.8% with a predicted 1.24% month-on-month increase from July.
The month of August saw an increase in summer produce prices, fuel hikes of 10-15% towards the end of July, a significant jump of 25-33% in metro tickets at the start of August, and a 21-31% surge in electricity tariffs. These factors have played a significant role in driving inflation upward. Inflation in Egypt has been gradually decreasing since hitting a record high of 38.0% in September. This has led to the country’s benchmark real interest rates turning positive in July for the first time since January.
A median of five analysts have predicted that core inflation, which excludes volatile items like fuel and certain food items, will decrease to 23.9% from 24.4% in July. This indicates that while there may be an overall decrease in inflation, certain essential items are still experiencing price hikes. The state statistics agency CAPMAS is set to release the official inflation data for August, shedding more light on the current economic situation in Egypt.