Increased supply, dollar decline behind decreasing commodity prices in Egypt


The Egyptian market is currently seeing an obvious decline in the prices of goods and services for the first time since the liberalization of the local currency three years ago.

Experts attributed the drop of prices to the increase of supply, rationalization of consumption, and the decline of the dollar exchange rate.

“The main reason for the decline is the huge amounts of the products pumped into the market,” said Sayed Nawawi, deputy head of the importers’ section at the Cairo Chamber of Commerce.

“The decline of the U.S. dollar against the Egyptian pound also contributed to the calm and stability of prices of goods,” Nawawi told Xinhua.

The Egyptian government announced in November 2016 the floatation of the local currency exchange rate against foreign currencies, leading to the rise of the U.S. dollar from 8.8 Egyptian pounds to nearly 18 pounds.

The decision, which was included in a national economic reform program, led to an unprecedented 33 percent rise of inflation rate.

But after three years of economic reform, the prices of goods and products in the Egyptian market have fallen remarkably recently with the year-on-year inflation reached 2.4 percent in October.

The decline in the prices of food commodities included meat, poultry and vegetables, and industrial products such as iron and cement.

The price of beef fell from 110-145 pounds (6.8-9 U.S. dollars) per kilo to 80-120 pounds per kilo currently.

The U.S. dollar has lost more than 10 percent of its value against the Egyptian pound since the beginning of this year, falling from 17.88 pounds at the beginning of the year to 16.10 pounds now.

Given the fact that salaries and incomes of citizens do not keep pace with the increase of supply of government products, goods and services, he said that the prices’ decline will continue in the coming period because the purchasing power is no longer strong.

Ashraf Arabi, undersecretary of the Economic Affairs Committee in the Egyptian parliament, said that the current decline in prices is definitely happening due to the increase in the supply of goods and products in the local market.

He also mentioned the rationalization of consumption by citizens which means the consumers has reprioritized their needs.

Arabi expected that the prices of goods will continue to decrease with the new trend of consumers of choosing only the goods they need, which are mostly cheap products.

However, the parliament’s official thinks that the depreciation of the dollar against the pound has nothing to do with the declining prices, because most of the low-prices commodities are produced domestically.

“The decline of the dollar exchange rate is not an effective tool in declining prices of food, vegetables and fruits,” he highlighted.

On the contrary, Karim El-Omda, an economic expert, said that the commodities that have dropped recently included iron and cement in addition to food commodities, and this decline is mainly linked to the decrease of the dollar exchange rate.

He explained that the depreciation of the dollar has led to a decline in the costs of some imports of production, which was reflected on the prices of goods.

“There are some strategic industries that the country has entered to achieve a kind of balance in the market like the establishment of marble complexes in the Suez Canal’s Ain Sokhna district as well as other iron factories, medical products and greenhouses in other areas,” he added.

He also explained that founding huge number of projects and factories by the government created an abundance of goods and products in the Egyptian market, which caused rebalance, and eliminated monopoly. Enditem

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