The market expects a significant increase in the inflation rate during the upcoming period after the application of the new increase in electricity prices and the upcoming application of the value-added tax (VAT).
The Central Agency for Public Mobilisation and Statistics (CAPMAS) revealed on Wednesday that the general index of consumer prices recorded an increase of 0.7% in July, compared to a 0.78% increase in June. The annual inflation rate was fixed at 14.8% in July without much change compared to June.
The basic inflation prepared by the Central Bank of Egypt (CBE) recorded a monthly rate of 0.25% in July, compared to 0.74% in June. The annual inflation rate dropped to 12.31% in July compared to 12.37% in June, according to the CBE.
The CBE has not revealed the reason for the decline in the basic inflation rate; however, CAPMAS noted that the reason for it is the 7.7% decrease in the price of poultry in July compared to June.
According to an economic expert in an investment bank, the recent increase in electricity prices is expected to increase inflation rates during the upcoming period because it will result in increased expenses for goods and services production.
“The annual rate of consumer price increase will rise in September to range between 15% and 16%, affected by the energy prices in both the commercial and industrial sectors, in addition to the economic reforms expected to be applied within the coming weeks,” said the expert.
The figures that the Ministry of Electricity released on Monday show that the cost of electric energy will increase by 20% on average in the current fiscal year for the commercial sector, while the increase for the industrial sector will range between 18% and 56%, according to the different segments of energy usage.
The expert believes that the increases that will be applied on household consumption, which are on average 40%, will not significantly affect the inflation rate, owing to the low weight of this item in the calculation of the index. She expected also the application of the value-added tax in August or September and the expected floating of the Egyptian pound in the same period will contribute to strengthening the current inflation wave.
He added that if a new increase in the prices of petroleum products is adopted before the end of 2016, it will be an additional factor feeding inflation.
