Daily News Egypt

Analysts see prices hikes as persistent, not seasonal - Daily News Egypt

Advertising Area




Advertising Area




Analysts see prices hikes as persistent, not seasonal

CAIRO: In the midst of public concern over the consistent rise in food prices and agricultural commodities, analysts have tried to zero in on the causes and propose possible solutions to face Egypt’s inflation woes. The Central Agency for Public Mobilization and Statistics (CAPMAS) reported this week a 21 percent annual increase in the price …


CAIRO: In the midst of public concern over the consistent rise in food prices and agricultural commodities, analysts have tried to zero in on the causes and propose possible solutions to face Egypt’s inflation woes.

The Central Agency for Public Mobilization and Statistics (CAPMAS) reported this week a 21 percent annual increase in the price of foodstuffs in August, due to seasonal effects, including Ramadan and the start of the academic year, in addition to a wage increase in July.

CAPMAS noted a particular increase in food prices in August, during which the price of meat and chicken rose by 32.9 percent, cereals and bread by 17.2 percent and fruits by 8.9 percent compared to the previous year.

The state statistics agency expects inflation to decelerate next month, coinciding with the end of seasonal effects on prices.

Headline inflation for August rose slightly to 10.9 percent, while core inflation — which cuts out volatile items such as food and vegetables — crept up to 8.17 percent, from 7.1 percent the previous month.

A recent study by Egypt’s Consumer Protection Agency (CPA) to monitor the movement of prices during Ramadan — which traditionally spurs a surge in consumption — has revealed a relative stability in the price of most commodities found in consumer cooperatives compared to hypermarket chains, prompting the government to label the outlets as a potential solution to ease inflation burdens.

Before Ramadan, the state-run daily Al-Ahram reported the government’s plan to increase the supply of meat, poultry, fish, oils, rice and beans in order to keep prices low during Ramadan.

Other measures taken to relieve inflationary pressure included setting up more consumer cooperatives, which provide subsidized goods at prices 20 percent lower than the market price, and seen as key to curbing seasonal inflation.

Prices at these cooperatives were 36.5 percent lower for poultry, 38 percent for meat, and 21 percent for eggs, and 14 percent for each of sugar, flour and pasta.

Said Al-Alfy, head of the CPA, said that the results confirm the important role of consumer cooperatives in the balance and stability of prices and called for a plan to develop cooperatives to ensure good quality of services.

“This study confirms the important role played by consumer cooperatives for reducing balance and stability to the prices of foodstuffs, and they present a competitive alternative to hypermarkets,” he told Al-Ahram.

Long term solutions

Although cooperatives may be considered a short-term solution, food prices in Egypt have generally been on an uptrend over the longer term, which analysts agree can only be remedied through structural and agricultural reforms and better planning.

Hany Genena, chief economist at Pharos Holdings, said that recent shocks to wheat, rice, meat and poultry sectors have contributed to rising prices. During Ramadan, when demand expectedly rises, issuing ration cards and increasing consumer cooperative outlets may be effective, he said, but will do nothing to curb general price increases that emanate from structural and planning weaknesses in government policies.

He also had reservations about the quality of products sold at cooperatives and the amount of available supplies offered to the public. “The increase in prices since the beginning of the year was not a seasonal increase,” he said, adding that Ramadan only aggravates an existing problem.

Genena cited recent shortages in the supply or rice locally, a fall in wheat imports following the Russian export ban and shortages in livestock and poultry supplies as factors that have induced the uptick.

The evidently constant rise in prices is not sustainable, he said, stressing the need to tackle the structural issues particularly shortages in food supplies as well as the more recent shortage in Egypt’s energy capacity. “This can be done by better agricultural planning and improved management of livestock and poultry supplies and imports,” he concluded.

For its part, Cairo-based investment bank Beltone Financial said, “We remain highly concerned by the continuing very high levels of food price inflation in Egypt, which are at much higher levels than other MENA region countries and emerging economies.”

Angus Blair, head of research at Beltone, told Daily News Egypt that one must look at the underlying issues to understand why Egypt, which has historically fared better than these countries agriculturally, has been experiencing supply shortages and, in turn, inflation.

“One of the main problems is that half of all agricultural produce is spoiled by the time it reaches the final market,” he said quoting a World Bank report.

Blair called for improving logistics and transport of agricultural products, adding that without crucial reforms improving productivity, quality and variety of Egyptian crops, mainly through agricultural education, inflation spurred by food prices will remain a persistent problem.

 

Advertising Area



https://dailyfeed.dailynewsegypt.com/2010/09/16/analysts-see-prices-hikes-as-persistent-not-seasonal/
Breaking News

No current breaking news

Receive our daily newsletter
Subscribe