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Thu 10 Jul 2008 01:27 PM

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Egypt inflation hits 20.2% in June

Egyptian urban inflation level rises further, driven by monthly price rises in food and entertainment.

Egyptian urban inflation rose to 20.2 percent in the year to June driven by monthly price rises in food and entertainment, while transport costs stabilised, the state statistics agency CAPMAS said on Thursday.

The rise in inflation also adds to political pressure on the Egyptian government, which has faced a wave of strikes and protests over price increases. The urban inflation rate compared to 19.7 percent in the year to May.

Egypt has responded to public anger over inflation by making more cheap food available on a ration card system. Food inflation has hit the poor especially hard because many of them spend more than half their income on food.

But overall price increases slowed on a monthly basis. Urban inflation rose 0.6 percent in the month to May versus 2.7 percent in the month to May, CAPMAS said.

Food and beverage price increases slowed in June, rising 0.8 percent compared to 3.6 percent a month earlier. Prices for culture and entertainment rose 9 percent in the month to June, but all other price baskets including for utilities and transport showed zero inflation for the month.

"This is a positive development indicating a drop in inflationary pressures in June," said Reham ElDesoki, senior macroeconomy analyst at Beltone Financial.

"We believe the CPI will end the year in the high teens, averaging around 15-17 percent. We are not out of the woods yet," she said.

Beltone had earlier said it expected year-on-year inflation to hit roughly 22 percent in June based on a forecast monthly increment of around 2 percent.

The rural and whole country indexes are updates only every other month, so economists focus on the monthly urban index. (Reuters)