Egypt: Egyptian inflation soars to over-seven-year high in August

In August, consumer prices rose 1.9% over the previous month, markedly above the 0.7% increase recorded in July. According to the Central Bank, the rise mainly reflected a surge in prices for food and beverages, while prices for regulated items also jumped on the back of increasing electricity prices.

Inflation came in at 15.5% in August, which was well above July’s 14.0% reading and marked the highest level since December 2008. Despite the government’s continuous efforts to reduce inflation and curb the outflow of foreign exchange, a continuously-depreciating Egyptian pound on the black market has heightened inflationary pressures. In addition, an increase in electricity prices by up to 47% last month contributed to August’s increase in consumer prices. The belated introduction of a 13% VAT, approved by Parliament last month, will only add further pressure on Egyptian consumer prices.

Meanwhile, annual average inflation rose from 10.7% in July to 11.3% in August, the highest level since January 2010. Core inflation, which excludes volatile items such as fresh fruit and vegetables, came in at a record-high 13.3% in August, notably above July’s 12.3% reading.

FocusEconomics Consensus Forecast participants expect inflation to average 11.8% in calendar year 2016, which is up 0.1 percentage points from last month’s projection. For calendar year 2017, the panel sees average inflation of 11.5%.