CAIRO: Egypt’s inflation rates are expected to decelerate gradually after 2015, but will remain in the upper single-digit range, global rating agency Moody’s Investors Service said in a recent report.
Egypt’s national and urban headline inflation rates slipped to 7.9 percent year-on-year in August from 8.3 and 8.4 percent respectively, in July, before inching up to 9-10 percent in September, compared to an average of 11 percent during fiscal year 2014-2015.
“Looking beyond 2015, we project inflation rates to gradually decline, but remain in the upper single-digit range, as infrastructure bottlenecks are addressed and fiscal consolidation reforms take root, which should also help to reduce inflation volatility,” Moody’s stated in its report.
It added that the risk of imported inflation due to anticipated further currency depreciation is likely contained in light of the global decline of low commodity prices. However, any spike in global commodity prices would push Egypt’s inflation rates up once more, according to Moody’s.
Also, the planned introduction of a valued-added tax (VAT) will temporarily raise consumer prices, but the report says the one-off impact may be moderated depending on the goods and services exempted from the tax.
Moody’s described the government’s track record of implementing revenue-enhancing measures, such as the introduction of new taxes, as being “mixed,” criticizing the suspension of introducing of the VAT as replacement for the current sales tax several times.
Egypt hopes to introduce the VAT before the year end, but an informed source previously told The Cairo Post that the approval of the VAT law would be shelved until the end of parliament elections in December.
Finance Minister Hany Qadry has downgraded the projected one-off rise in consumer price that might result from applying the VAT to 1.3 percent according to the assessments of the International Monetary Fund and the World Bank, Youm7 reported.