Inflation stable Inflation figures released by the Central Agency for Public Mobilisation and Statistics (CAPMAS) this week showed that strong consumption driven by the summer vacation and the oncoming holy month of Ramadan has kept the Consumer Price Index (CPI) steady in July at 9.9 per cent. The CPI gauges the prices of a basket of essential goods and services. CI Capital expects a CPI reading of 10.4 per cent in August. "With the expected seasonal increase in CPI, and given the slight improvement in GDP growth to 4.3 per cent in the third quarter of 2008/09, we do not see the necessity for a further cut in interest rates." Encouraged by dropping inflation, the Central Bank of Egypt had made five consecutive interest rate cuts this year to boost to the economy. Thumbs up Merrill Lynch, leading world financial management company, this week said Egypt could be one of the first emerging economies to overcome the current global recession. In a report released earlier this week, Merrill Lynch said that Egypt was one of the few countries to achieve positive growth in 2009. It attributed that growth to local demand as well as a robust financial sector that stayed clear of high- risk financial investments. The report also highlighted the role of the LE15 billion stimulus package disbursed by the government towards infrastructure projects, aiming to create jobs and boost growth. Lower commodity prices and dropping inflation, the report said, eased pressure on the public budget, which made it possible for the government to make the additional investments. Merrill Lynch expects foreign investments to gradually flow back to Egypt because it is the region's largest economy and it enjoys access to the US, EU and other regional markets. No maintenance allowed To prevent any shortage in cement supply on the local market, the Ministry of Trade and Industry (MTI) announced that it would not accept any excuses from manufacturers to reduce production. The MTI last week informed cement manufacturers that they are not permitted to reduce or halt their production for any reason, not even for annual maintenance. Cement companies cannot halt production without prior approval from the MTI. Four cement companies, namely Suez Cement, Lafarge, Alexandria-Beni Suef and Misr-Qena, submitted letters to the ministry asking for permission to halt production for maintenance purposes. Their requests were all turned down. Indeed, they were warned that if managers violate the ministry's orders they will be subject to jail sentences of one to six years and fines ranging between LE300 to LE1000. In addition, factories maybe closed down for six months and licenses might also be revoked. Due to increased demand, cement prices jumped from LE500 to LE700 per ton a few weeks ago. Any drop in production will mean less cement available, which would in turn lead to higher prices. A monthly report issued this week by the Central Agency for Public Mobilisation and Statistics (CAPMAS) on prices said that cement prices increased between seven to 21 per cent during July 2009. Moreover, following a construction boom, the growth rate of local cement consumption was up 26 per cent in 2009 according to a report issued recently by CI Capital. This increased demand was stimulated by low steel prices and a backlog of projects, as well as the government's commitments to develop infrastructure projects, construct middle-income housing compounds and offer land for sale with strict construction time schedules. To meet demand, the MTI is currently encouraging imports and has extended the ban on exports of cement and clinker until October 2010. During July, 300,000 tonnes of cement were imported.
