Egypt’s August Inflation Expected to Decrease Despite Rising Prices, Reports Reuters

CAIRO (Reuters) – Egypt’s inflation is projected to have decreased for the sixth consecutive month in August, aided by a favorable base effect. However, some analysts suggest that there may have been a month-to-month increase due to a series of price hikes implemented by the government.

In March, Egypt entered into an $8 billion financial support agreement with the International Monetary Fund, aimed at controlling inflationary pressures in monetary policy. This agreement, however, necessitates an increase in numerous domestic prices.

As part of efforts to address a budget deficit, which reached 505 billion Egyptian pounds (approximately $10.3 billion) for the fiscal year ending June 30, the government has raised the prices of various subsidized goods.

Forecasts by 19 analysts indicate that annual urban consumer inflation has slowed to a median of 25.1% in August, down from 25.7% in July. Heba Mounir from HC Securities stated, "We expect urban inflation to decelerate to 24.9% year-on-year for August due to a favorable base effect. However, we anticipate a 1.0% increase month-on-month resulting from recent energy and transportation cost hikes at the start of August."

Naeem Holding projected a headline inflation rate of 24.8% annually, predicting a month-on-month increase of 1.24% from July. This is attributed to rising prices for summer produce, fuel increases of 10-15% toward the end of July, a 25-33% rise in metro fares at the beginning of August, and an increase of 21-31% in electricity tariffs, partly implemented in August.

Inflation has gradually declined from a record high of 38.0% reached in September, which turned Egypt’s benchmark real interest rates positive in July for the first time since January 2022.

A median forecast from five analysts suggests that core inflation, excluding volatile items like fuel and certain food types, would decrease to 23.9%, down from 24.4% in July.

The state statistics agency CAPMAS is scheduled to release inflation data for August on Tuesday.