Egypt’s Inflation Outlook

CAIRO (Reuters) – Egypt’s inflation is forecast to have declined for a sixth month in August, helped by a favorable base effect. However, some analysts believe it likely increased month-on-month after a series of government-led price hikes.

In March, Egypt signed an $8 billion financial support package with the International Monetary Fund (IMF) to control inflationary monetary policy, which requires raising many domestic prices. As a result, the government has increased the prices of various subsidized products to combat a budget deficit that reached 505 billion Egyptian pounds ($10.3 billion) in the fiscal year ending June 30.

According to forecasts from 19 analysts, annual urban consumer inflation slowed to a median of 25.1% in August from 25.7% in July. Heba Mounir of HC Securities stated, “We expect urban inflation to decelerate to 24.9% year-on-year (y-o-y) for August due to a favorable base effect. However, we anticipate a 1.0% month-on-month (m-o-m) increase due to recent hikes in energy and transportation costs at the beginning of August.”

Naeem Holding predicted an annual headline inflation of 24.8% with a 1.24% m-o-m increase from July. This increase is attributed to higher summer produce prices, a 10-15% rise in fuel prices near the end of July, and a 25-33% jump in metro ticket prices and 21-31% increase in electricity tariffs, partly in August.

Inflation has gradually fallen from a record high of 38.0% in September, positively impacting Egypt’s benchmark real interest rates for the first time since January 2022. A median of five analysts also predicted that core inflation, which excludes volatile items like fuel and certain food types, would decline to 23.9% from 24.4% in July.

The state statistics agency CAPMAS is expected to release the August inflation data on Tuesday.