Egypt's annual urban inflation hits 8.2 pct in June

Marwa Hussein, Thursday 10 Jul 2014

Annual urban inflation in May-June hits 8.2 pct compared to 8.29 pct in the same month last year. However, monthly inflation increased after having declined last month

(Photo: Reuters)
Egypt's annual urban inflation rate registered 8.2 percent in June, state statistical body CAPMAS announced in a press conference Tuesday.
Urban inflation had reached 8.9 percent in the 12 months to June 2013. 
However, monthly urban inflation increased by one percent in June compared to a decline of 0.7 percent last month.
"We were keen to announce June's inflation figures in a press conference to highlight that it has nothing to do with the recent decisions of hiking fuel prices," said Abu-Bakr El-Guendy, head of CAPMAS, Thursday.
Asked about his expectations for July, El-Guendy said his duty is not to predict, but he expects a higher inflation rate as a consequence of the energy price hikes.
"It is expected that fuel price might lead to price increases of some products and services other than transportation," Al-Guendi said. He added that the increase should be finite, as the share of transportation in the total cost of food production, for example, should not exceed five percent. 
According to statistics, inflation in June was mainly pushed by a tangible hike in poultry and vegetables prices. In fact, annual food inflation recorded 11.2 percent in June, while yearly headline inflation rate was only 8.2 percent.
Inflation usually increases ahead of and during the fasting month of Ramdan, which started 29 June, as demand on food and beverages increases.
President Abdel-Fattah El-Sisi issued decisions on Friday, 4 June, to increase fuel and electricity prices in order to cut the state deficit. He also increased sales taxes on cigarettes and alcohol. 
Iman Negm, economist at HC, Cairo based investment bank, expects inflation to reach 13 to 15 percent in an interval of six to 12 months if the government manages to supervise the market and inhibit drivers and merchants from exaggerating prices.
If the measures the government is undertaking to contain prices fail, Negm expects inflation to reach 25 percent in the coming year, a level that was reached in July 2008, a few months after a milder cut of subsidies that was also accompanied by a surge of international cereal prices. 
El-Guendy recalled during the press conference that Prime Minister Ibrahim Mahlab asked CAPMAS a few days before announcing the decision of cutting subsidies to produce a study assessing the expected impact of the move on transportation costs.
According to El-Guendy, the price increase on diesel by more than 60 percent to LE1.80 (around a quarter dollar) should increase the cost of a microbus trip in Cairo that does not exceed five kilometres by LE0.7 for all passengers.
"That means around five piastres per passenger, but as five and 10 piastre notes are no more available, the government has authorised drivers to levy a 25 piastres increase for a trip of LE1," says El-Guendy.
According to CAPMAS research, a quarter of microbus drivers followed the government pricing guide, while 50 percent want to impose a 50 percent increase on passengers and the remainder where aiming to double prices. 
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