Egypt’s inflation forecast has been a topic of interest, with expectations of a decrease for the sixth consecutive month in August. This decline has been attributed to a favourable base effect. However, analysts warn that there is a possibility of an increase month on month due to a series of government-led price hikes. These hikes were a result of an $8 billion financial support package with the International Monetary Fund, which required Egypt to raise domestic prices to maintain control over inflationary monetary policy.
The Egyptian government responded to a budget deficit of 505 billion Egyptian pounds ($10.3 billion) by raising the prices of many subsidised products. This move was seen as necessary to tackle the deficit, but it also contributed to the inflationary pressures in the economy. Analysts have pointed out that the spike in prices for energy, transportation, summer produce, and other essential goods have had a direct impact on the inflation rate.
According to a survey of 19 analysts, the median forecast for urban consumer inflation in August was 25.1%, a slight decrease from July’s 25.7%. However, some analysts predict a month-on-month increase due to recent cost hikes. Heba Mounir of HC Securities anticipated a 1.0% increase in urban inflation, attributing it to the rise in energy and transportation costs. Naeem Holding, on the other hand, forecasted an increase of 1.24% month on month, citing various price hikes in key sectors.
Core inflation, which excludes volatile items like fuel and certain food products, is also expected to see a decline from July’s 24.4% to 23.9% in August. This reduction indicates a level of stability in the economy, despite the overall inflationary pressures. The state statistics agency CAPMAS is scheduled to release the official inflation data for August, providing a clearer picture of the economic situation in Egypt.
Egypt’s inflation forecast reflects the complex interplay between government policies, international agreements, and domestic economic challenges. While there are signs of improvement, such as the gradual decrease in inflation rates, there are also concerns about the impact of price hikes on the average consumer. Moving forward, it will be crucial for the Egyptian government to strike a balance between managing inflation and addressing budget deficits to ensure long-term economic stability.
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