IMF projects decrease in Egypt’s inflation rate in 2016 and 2017

The International Monetary Fund (IMF) has projected that inflation in Egypt will decrease to 9.6 per cent this year compared to 11 per cent in 2015 despite pressures on prices, the devaluation of the Egyptian pound and the prospective application of the Value Added Tax (VAT).

In a report released here Wednesday, the IMF said that inflation rates will be close in 2016 and 2017 where it is projected that in 2017, the inflation rate will decline by only 0.1 per cent to reach 9.5 per cent.

A United Arab Emirates investment bank Arqaam Capital forecast that the average inflation during the current fiscal year 2015-2016 will reach 10 per cent, which is likely to grow the following year.

The bank said the prospective application of the VAT, in addition to expectations of further devaluation of the local currency against the dollar and the possible procedures taken to restructure the energy prices, are all factors that can pressure inflation during the second half of 2016.

Credit rating agency Fitch projected last month an increase in inflation levels in Egypt, given the weaker exchange rate. Fitch also said that if government plans to depart from the sales tax and implement VAT, that could put “upward pressure” on prices.

Mohamed Abu Basha, a macroeconomic analyst at EFG Hermes, estimated the increase in inflation to be between 10 and 11 per cent during the current fiscal year.

According to the state-run Central Agency for Public Mobilisation and Statistics (CAPMAS), the average inflation during 2015 was about 10.6 per cent.