By CentralBankNews.info
Egypt’s central bank, which earlier today held its benchmark overnight deposit rate steady at 8.25 percent, reiterated its guidance from February that the “pronounced downside risks to domestic GDP combined with the negative output gap since 2011 will limit upside risks to the inflation outlook going forward.”
The Central Bank of Egypt (CBE) added that upside risks to inflation continue to be contained as a sharp rebound in international food prices is unlikely in light of the global economy.
Egypt’s headline inflation rate rose to 9.82 percent in March from 9.76 percent in February after declining in recent months from a 2013 high of 12.97 percent in November, the highest rate since February 2009.
The central bank, which has maintained rates this year after cutting them by 100 basis points in 2013, was widely expected to hold rates steady.
The increase in prices was mainly driven by higher prices of several food items along with a seasonal increase in fruits and vegetables, the CBE said, adding that core CPI rose to an annual rate of 9.90 percent in March from 9.70 percent.
Egypt’s economy has been suffering since the political uprising in 2011 and the CBE said there were downside risks to growth from the challenges facing the euro area and softening growth in emerging markets.
Egypt’s Gross Domestic Product expanded by 1.4 percent in the second quarter of the current 2013/14 fiscal year, which ended in December 2013, compared with growth of 1.04 percent in the previous quarter.
This brought the annual growth rate for the first half of the current fiscal year to “a feeble” 1.2 percent, down from growth of 2.1 percent in the 2012/13 fiscal year that ended June 30, CBE said.
The CBE said economic activity remained sluggish in the second fiscal quarter due to modest growth in most key sectors, such as manufacturing and construction, with a contraction seen in both the tourism and petroleum sectors.
Investment activity is also low due to the heightened uncertainty that has faced investors since early 2011 and weak credit growth to the private sector, the bank said.