Egypt's inflation to level off starting April: Pharos



Sun, 12 Mar 2017 - 08:51 GMT


Sun, 12 Mar 2017 - 08:51 GMT

CAPMAS 2012 - Youm7 (Archive)/Salah Said

CAPMAS 2012 - Youm7 (Archive)/Salah Said

CAIRO – 12 March 2017: Egypt's inflation is expected to decelerate starting in the 4th quarter of the current fiscal year 2016/2017 (which ends June 30), despite a recent depreciation in the pound against the dollar, Pharos Holding said Sunday.

Egypt's annual urban consumer inflation jumped to 30.2 percent in February from 28.1 percent in January, the highest in 30 years, while the monthly rate of overall price gains eased to 2.6 percent in February from 4.1 percent in January, state- statistics body CAPMAS announced Thursday.

"Both monthly headline and core inflation rates recorded the slowest pace since the pound’s flotation at 2.6 percent month-on-month," said Pharos Holding's economist, Ramy Oramy.

He added that the rise in the annual inflation rate last month was affected by a low base in the corresponding period of last year, reiterating his forecast that "the impact of the base effect will diminish gradually, starting Q4 (which starts in April.)"

Inflation has accelerated in Egypt since November on the back of the pound's 50 percent plunge against the dollar after the flotation, coupled with introducing a value-added tax and subsidy cuts. These reforms were necessary for Cairo to sign a $12 billion deal with the International Monetary Fund to support Egypt's economic reform program over three years.

In February, the monthly price gains were mainly driven by a pickup in fruit and vegetable prices, to 0.76 percent from 0.54 percent in January. On the other hand, core food and non-food items’ contribution to the monthly inflation rate went down. The first nearly halved, from 3.3 percent in January to 1.5 percent in February, and the latter recorded a slight drop from 0.59 percent to 0.48 percent.

The pound's recent depreciation against the dollar is "no surprise," said Oraby, adding that it will not add significant inflationary pressure as the USD remains below December's record high level of 19 EGP.

He further noted that foreign investors' purchase of $300 million of EGP-denominated treasuries on Thursday should curb strong hikes in the exchange rate.



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