Back to the complete issue
Thursday, 11 January 2018

Monthly inflation records lowest rate in over two years

Monthly inflation fell in December for the first time in two years, coming in at -0.2%, CAPMAS announced. The rate is the lowest since November 2015. Annual Inflation also dropped to 21.9% from 26% a month before. Annual core inflation reached 19.86% during December, down from 25.54% in November. On a monthly basis, core inflation declined by 0.37% last month, compared to an increase of 1.31% the month before, according to central bank data.

The monthly decline was driven by a decrease in the prices of various food staples, including red meat, poultry, vegetables, and lentils, EFG Hermes says. Radwa El-Swaify, head of research at Pharos Holding, thinks holiday promotions and discounts might have helped push food prices down, Bloomberg reports. “The stability of prices on a monthly basis makes sense: any further increases would affect demand,” El-Swaify says.

Finance Minister Amr El Garhy expects the annual inflation rate to drop below 20% next month and to hit 10-12% during the year, according to Reuters. In 2019, he sees inflation falling to single digits and believes the reading for last month is “a better than good indication and puts us on a good path.” In the nearer term, EFG Hermes’ Mohamed Abu Basha expects inflation rates to slow down to 17-18% in January and 15-16% in February and to stabilize around 13-14% by mid-year.

Can we now have lower interest rates, please? With the drop in inflation, speculation over when and by how much interest rates should drop has begun. Easing may begin in the first quarter, according to CI Capital Holding economist Hany Farahat. Even so, an exodus of foreign investors is unlikely because longer-term securities will remain attractive, he told Bloomberg in its roundup on what to expect from MENA central banks. The benchmark interest rate may drop to 13.25% from 18.75% by year-end, according to London-based Capital Economics. The CBE Monetary Policy Committee will hold its next meeting on 15 February.

Separately, sources from the CBE say that Egypt has repaid USD 30 bn in 2017 to foreign lenders including the Paris Club and international oil companies, according to Al Borsa. Egypt borrowed USD 18.8 bn last year, the source added.

Enterprise is a daily publication of Enterprise Ventures LLC, an Egyptian limited liability company (commercial register 83594), and a subsidiary of Inktank Communications. Summaries are intended for guidance only and are provided on an as-is basis; kindly refer to the source article in its original language prior to undertaking any action. Neither Enterprise Ventures nor its staff assume any responsibility or liability for the accuracy of the information contained in this publication, whether in the form of summaries or analysis. © 2022 Enterprise Ventures LLC.

Enterprise is available without charge thanks to the generous support of HSBC Egypt (tax ID: 204-901-715), the leading corporate and retail lender in Egypt; EFG Hermes (tax ID: 200-178-385), the leading financial services corporation in frontier emerging markets; SODIC (tax ID: 212-168-002), a leading Egyptian real estate developer; SomaBay (tax ID: 204-903-300), our Red Sea holiday partner; Infinity (tax ID: 474-939-359), the ultimate way to power cities, industries, and homes directly from nature right here in Egypt; CIRA (tax ID: 200-069-608), the leading providers of K-12 and higher level education in Egypt; Orascom Construction (tax ID: 229-988-806), the leading construction and engineering company building infrastructure in Egypt and abroad; Moharram & Partners (tax ID: 616-112-459), the leading public policy and government affairs partner; Palm Hills Developments (tax ID: 432-737-014), a leading developer of commercial and residential properties; Mashreq (tax ID: 204-898-862), the MENA region’s leading homegrown personal and digital bank; Industrial Development Group (IDG) (tax ID:266-965-253), the leading builder of industrial parks in Egypt; Hassan Allam Properties (tax ID:  553-096-567), one of Egypt’s most prominent and leading builders; and Saleh, Barsoum & Abdel Aziz (tax ID: 220-002-827), the leading audit, tax and accounting firm in Egypt.