The Egyptian economy has been facing challenges with inflation for quite some time now, and the situation seems to be worsening. Despite forecasts suggesting a decline in inflation for the sixth consecutive month in August, some analysts are wary of the impact of government-led price hikes.
The government, in an effort to battle a significant budget deficit, has been forced to raise the prices of many subsidised products. This has led to an increase in inflationary pressures, with the fiscal year ending in June showing a deficit of 505 billion Egyptian pounds. The recent price hikes in energy and transportation costs are expected to further exacerbate the situation.
Analysts have predicted that annual urban consumer inflation will slow to a median of 25.1% in August from 25.7% in July. However, the month-on-month increase is expected to be around 1.0% due to the recent price hikes. The rising costs of summer produce, fuel, metro tickets, and electricity tariffs have contributed to this inflationary pressure.
According to Heba Mounir of HC Securities, urban inflation is likely to decelerate, but the recent price increases will offset any significant improvements. Naeem Holding also predicts an increase in headline inflation, highlighting the challenges faced by consumers in the current economic climate.
Core inflation, which excludes volatile items like fuel and certain types of food, is expected to decline to 23.9% from 24.4% in July. This presents a slightly more optimistic outlook, but the overall trend of inflation remains troubling for Egypt’s economy.
Inflation has been gradually decreasing from record highs seen in September, but the recent spikes in prices indicate that the situation is far from stable. The government’s efforts to control inflation through monetary policy have had mixed results, with real interest rates turning positive only recently.
The state statistics agency CAPMAS is set to release the August inflation data soon, providing more clarity on the current economic situation in Egypt. The challenges posed by inflation and government-led price hikes must be addressed effectively to ensure the stability and growth of the Egyptian economy in the long term. The forecasts and projections indicate that the road ahead may be rocky, but with strategic policy measures, Egypt can overcome these economic challenges.