Egypt’s annual inflation rate has declined to 7.9 per cent in August from 8.3 per cent in July. This marks the third consecutive month for the gauge to decline after reaching 13.1percent, a five-year high in, May 2015.
The decline stems from containing the seasonal price hikes in food and beverages, the largest component in the basket of commodities and services that are used to calculate inflation. Also transport inflation remained low after the effects of last year’s fuel price hikes unwound in July.
The government expects to reduce the inflation rate to be around 10 to 11 per cent in 2015-2016 and around 7 to 8 per cent by the year 2018-2019.
Pharos Holding expects the rate to remain contained even after the full application of the Value added Tax (VAT) whose impact will not exceed the a one-off level effect especially in light of the plunge in international commodity prices.
Prime Holding sees it differently as while it expects the rate to keep on relaxing in the upcoming two month on it would start climbing up back again by the time of introducing the expected VAT and the expected depreciation of the Egyptian pound by the end of the year – leading to increasing importation costs – especially, after paying the government’s upcoming dues in September and October, namely $1.25 billion of maturing US-backed bonds and repaying $1 billion loan from Qatar respectively.
