Egypt’s an­nual in­fla­tion in­creases to 17.5% in Oc­to­ber: CAPMAS

MONTH’S AN­NUAL IN­FLA­TION WIT­NESSED LARGE DE­CLINE Y-O-Y, DOWN FROM 31.8% IN OC­TO­BER 2017

The Daily News Egypt - - Front Page - By Ne­hal Samir

Egypt’s an­nual in­fla­tion de­clined to 17.5% year-over-year (y-o-y) in Oc­to­ber, down from 31.8% in Oc­to­ber 2017, the Cen­tral Agency for Pub­lic Mo­bi­liza­tion and Sta­tis­tics (CAPMAS) an­nounced on Satur­day.

How­ever, the an­nual in­fla­tion in­creased com­pared to 15.4% in Septem­ber and 13.6% in Au­gust 2018. It was the third con­sec­u­tive month-over-month (m-o-m) rise in in­fla­tion.

The con­sumer price in­dex (CPI) also in­creased by 2.8% m-o-m,record­ing 311.2 points in Oc­to­ber, fol­low­ing a pre­vi­ous 2.6% rise in Septem­ber.

The in­crease in CPI came as a re­sult of the price hikes of veg­eta­bles by 13.2%, and by about 15.1% for ed­u­ca­tion sec­tor ser­vices, the re­port ex­plained.

In July, the an­nual in­fla­tion dropped to 13%, down from 13.8% in June, af­fected by the de­ci­sions of in­creas­ing fuel prices by rates rang­ing be­tween 17.4% and 66.7%.

The in­fla­tion wit­nessed a sharp in- crease in 2017 fol­low­ing harsh re­form mea­sures adopted by the govern­ment, in­clud­ing the pound flota­tion and cutting en­ergy sub­si­dies.

In July 2017, the in­fla­tion hit its peak of 34.2%, mark­ing the high­est record in nearly three years.

There was some de­cline in the in­fla­tion rate in the pe­riod from November 2017 to May 2018, but it in­creased again in June.

The Cen­tral Bank of Egypt (CBE) an­nounced re­cently that it tar­gets to de­crease in­fla­tion to 10-16% in the fourth quar­ter (Q4) of 2018.

This month’s rise caused doubts in the Egyp­tian mar­ket over the CBE’s abil­ity to achieve its tar­geted in­fla­tion rate.

Eco­nomic ex­pert Rashad Abdo told Daily News Egypt on Satur­day that he is not wor­ried about the in­fla­tion rise, point­ing out that it may de­cline in the next month to reach the CBE`s tar­get, or record a slight in­crease.

Abdo said the coun­try may face some dif­fi­cul­ties in 2019 as the govern­ment in­tends to lift fuel sub­sides com­pletely.

Lift­ing fuel sub­sides is part of the eco­nomic re­form agenda sup­ported by the IMF over an agree­ment to pro­vide Egypt with $12bn loan. The re­form pro­gramme was launched in November 2016, slash­ing a large part of fuel sub­si­dies in 2017, re­sult­ing in a 60% surge in fuel prices.

In nor­mal cases, lift­ing fuel sub­sides should pos­i­tively af­fect fuel ex­penses bill in the state’s bud­get, how­ever that did not hap­pen due to fuel prices glob­ally,Abdo stated.

“In line with the global petroleum price hike, Egypt will be forced to fur­ther cut the en­ergy sub­sides in 2019, in­clud­ing fuel and elec­tric­ity,” he added.

Ac­cord­ing to this sce­nario, he con­tin­ued that all the goods prices will in­crease,which will con­sec­u­tively af­fect the in­fla­tion rate likely to go beyond 17.5% in 2019.

“In that case,the CBE will be forced to in­crease the in­ter­est rate which will neg­a­tively af­fect in­vest­ments,” he ex­pected.

Fol­low­ing the pound flota­tion in November 2016, the CBE raised the in­ter­est rate three times by 7%.The first time was af­ter the flota­tion di­rectly by 3%, then 2% in last May, and 2% in last July. In 2018, the bank de­creased the in­ter­est rates by about 1% (100 ba­sis points).

This year’s de­cline of in­ter­est rates was con­ducted over two times.The first was in mid-Fe­bru­ary and the sec­ond in late March, bring­ing in­ter­est rates to 16.75% for de­posits and 17.75% for lend­ing. In the last meet­ing for the CBE’s Mon­e­tary Pol­icy Com­mit­tee in Septem­ber, it de­cided to keep the in­ter­est rates un­changed for the fourth time this year.

Abdo noted that he can­not pre­dict the in­fla­tion rate in 2019, ex­plain­ing that it depends on how far the govern­ment will de­crease the en­ergy sub­si­dies.

The CPI also in­creased by 2.8% m-o-m, record­ing 311.2 points in Oc­to­ber, fol­low­ing a pre­vi­ous 2.6% rise in Septem­ber

In line with the global petroleum price hike, Egypt will be forced to fur­ther cut the en­ergy sub­sides in 2019, in­clud­ing fuel and elec­tric­ity

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