Annual inflation rate records 24.3% in December, expected not to fall below 20%

Hisham Salah
2 Min Read
Annual core inflation reached 12.3% in June, up from 12.23% in May

The annual Inflation rate hiked to 24.3% in December, compared to 20.2% in November, according to a statement issued by the Central Agency for Public Mobilization and Statistics (CAPMAS).

The statement issued on Tuesday attributed the increase of the inflation rate to price hikes in the food and beverage sector, as they registered an increase of 29.3%, representing a 15.12% increase in the Consumer Price Index (CPI).

However, the CAPMAS said that commercial goods for tobacco and related products increased by 25.6%, housing, water, electricity, gas, and fuel services by 8.3%, and healthcare services by 33.3%.

Reham El-Desoki, a senior economist at Arqaam Capital, said in a statement that she expected that the “annual headline inflation to jump to 20% at the end of 2016 and early 2017 as the effect of higher energy prices continued to raise the prices of goods and services”.

“The high annual headline inflation is expected to linger for several years, dropping to the single digit level by the end of 2019 and early 2020. This is mainly due to the base effect and changes in the indices in previous years which now result in higher changes in the overall CPI,” she added

El-Desoki continued: “We expect core inflation to also jump, reflecting the general acceleration in price increments, especially of volatile food items included in the core index.”

“We expect this trend to continue in the coming few months as importers and local vendors adjust their selling prices to compensate for the increased costs stemming from the liberalisation of the foreign exchange rate, high energy prices, and higher customs tariffs, especially on imported food and personal hygiene products, household appliances, clothing, footwear, and other miscellaneous goods,” she noted.

From another perspective, Eman Negm, an economist at Prime Holding, said that the rate is higher than expected, adding that the third quarter of fiscal year (FY) 2016/2017 is expected to witness more relaxation. However, she added that it wouldn’t fall below 20%.

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