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Tuesday, 4 July 2017

Private sector hikes prices in response to the fuel subsidy cuts

Private sector hikes prices in response to the fuel subsidy cuts: Food producers are days away from announcing new prices that are expected to be 10-15% higher, industry executives tell Al Borsa. The move comes as part of a series of measures companies are taking to offset production costs as a result of last Thursday’s fuel hikes. These include adjusting profit margin projections and increasing exports, improving packaging and marketing capabilities, and decreasing the size and weight of products.

The auto industry is way ahead of the food sector on that with a number of companies raising prices on cars. GB Auto marked up its Hyundai and Geely models by EGP 1,600-8,000, Al Mal said on Monday, while Al-Mansour Automotive added some EGP 2,400-9,000 to the price of its Chevrolet brands. The move is expected to exacerbate the slump in auto sales driving it down by as much as 40% in the coming months, Egyptian Automotive Dealers Association head Osama Aboul Magd tells Youm7. The price hikes might also change the market dynamics from the demand-side as consumers will be looking for models that offer them higher fuel efficiency, El Masria Auto CEO Shady Rayan says.

Fertilizer companies’ hopes to raise price were thwarted as the government reportedly denied their request yesterday to raise product prices by EGP 500-1000 per tonne, the newspaper adds. Authorities will be paying the additional cost of EGP 3 mn a month to transport some 200k tonnes of fertilizers to avoid passing on costs to farmers, Agricultural Union head Mamdouh Hamada says.

The government has been making efforts to coordinate with the private sector to limit the inflation, which, according to Vice Minister of Finance Ahmed Kouchouk is expected to rise by 3-4.5%. Supply Minister Ali El Moselhy and members of the Federation of Egyptian Chambers of Commerce agreed during a Monday meeting that shipping and good transport fees should not rise by more than 10% in response to the most recent hike in fuel prices, Al Mal reports. The Finance Ministry also decided to relieve the shipping and unloading of imported goods from the value-added tax — backtracking on a decision it had issued early in June — in a possible effort to keep shipping costs lower, according to Al Mal.

Meanwhile, the MPs who never tire of grandstanding are asking for price controls, according to AMAY. Some, such as MP Mohamed Elsewedy, also demanded that the government pay farmers higher prices for agricultural products such as barley, sugarcane, and beets to offset the effects of inevitable inflation.

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