Egypt’s overall annual headline inflation rose to 34.2 percent in July, topping last April’s 32.9 percent decades-high inflation, according to figures released by the Central Agency for Public Mobilization and Statistics.
July’s inflation rate met the expectations of economists Mada Masr previously spoke with, who forecast that the spikes in fuel and electricity prices, as well as a 1 percent rise in the value added tax rate in the last two months will raise price levels.
On a monthly basis, inflation in July rose by 3.3 percent, accelerating the rate of inflation after it slackened in the June, when monthly inflation was 0.8 percent and annual inflation was 30.9 percent, compared to the month before, when monthly inflation was 1.6 percent.
July’s inflation was driven by price increases in categories of goods and services in CAPMAS’ monthly inflation report, which ranged between 10.2 percent for housing, water, electricity, gas and fuel, and 47 percent for culture and entertainment.
Prices for food and beverages rose by 43 percent, transport by 36.7 percent and healthcare by 24 percent, said the report.
Senior economist at investment bank Arqam Capital Reham al-Desouky said in an analytical statement sent to Mada Masr that electricity and tobacco price hikes will impact inflation in August, while water and public transport price increases will show in inflation rates for August and September.
Desouky added that seasonal factors like the commencement of the new school year and Muslim Eid festivities in September will add to other inflationary pressures, and he expects urban inflation, which reached 33 percent in July according to CAPMAS, to remain between 32 percent and 33 percent in the coming two months.
Inflation rates have soared in recent months following inflationary economic measures taken last November by the Egyptian government as part of its agreement with the International Monetary Fund for a US$12 billion loan.
At the end of June the government announced a hike in fuel prices, ranging from 5 percent to 100 percent, that affected gasoline, diesel and butane cylinders, marking the second increase in eight months. Electricity prices were also raised by up to 42 percent, and VAT increased in July by 1 percent, raising it from 13 percent to 14 percent.
Last February, annual overall headline inflation surpassed 30 percent, reaching 31.7 percent, and has not dropped below 30 percent since.
The Central Bank raised interest rates by two percentage points at the beginning of July, bringing the overnight deposit rate to 18.75 percent and overnight lending rate to 19.75 percent.
In doing so, the CBE increased interest rates by over 1000 basis points over one and a half years, saying the hikes were temporary and aimed to control inflation, hoping it would reach 13 percent in the third quarter of 2018.