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Egypt's Inflation Rate Eases for Fourth Month Running in June

Egyptian street vendors carrying breads, drive past a currency exchange point, displaying images of the US dollar, in Cairo, Egypt May 9, 2024. REUTERS/Amr Abdallah Dalsh Purchase Licensing Rights
Egyptian street vendors carrying breads, drive past a currency exchange point, displaying images of the US dollar, in Cairo, Egypt May 9, 2024. REUTERS/Amr Abdallah Dalsh Purchase Licensing Rights
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Egypt's Inflation Rate Eases for Fourth Month Running in June

Egyptian street vendors carrying breads, drive past a currency exchange point, displaying images of the US dollar, in Cairo, Egypt May 9, 2024. REUTERS/Amr Abdallah Dalsh Purchase Licensing Rights
Egyptian street vendors carrying breads, drive past a currency exchange point, displaying images of the US dollar, in Cairo, Egypt May 9, 2024. REUTERS/Amr Abdallah Dalsh Purchase Licensing Rights

Egypt's annual urban inflation rate slowed for a fourth consecutive month in June, to 27.5% from 28.1% in May, data from the country's statistics agency showed on Wednesday.

June's fall extended the downward shift from a record 38% in September 2023 as authorities have shifted to an inflation targeting model and a flexible exchange rate.

Egypt's core inflation, which strips out volatile items such as fuel and some types of food, eased to 26.6% year on year from 27.1% in May, central bank data showed later on Wednesday, Reuters reported.

Analysts have, however, warned of potential risks that could disrupt the downward trajectory including increases in administered prices such as fuel, medicine, fertilizers, and natural gas.

"Egypt is going through 30 months of intensive economic reforms that are expected to include repricing of subsidized electricity and fuel, which poses major challenges to taming inflation," said Mona Bedeir of Al Baraka bank.

Food and beverage prices increased by 30.8% in June on annual basis and by 3% month on month, following a 300% increase in the price of subsidized bread which came into effect on June 1.

The impact of the hike was limited by bread's relatively light weight in the index - it only accounts for around 1% of the food basket - and offset by disinflation of other food items and a favourable base effect.

Bedeir said that although the base-year effect is still strong enough to absorb some of the expected price hikes throughout the year, unexpected problems could still surprise policymakers.

"Such risks include power shedding policy which impacted fertilizer factories and could eventually impact the harvest of some crops. Climate change and the heat wave could also play a similar role, leading to higher food inflation," Bedeir said.

Since March, Egypt has been implementing austerity measures linked to an expanded $8 billion dollar financial support package from the International Monetary Fund.

The IMF said on Tuesday it had pushed back its third review of Egypt's program to July 29, which Bedeir said could signal that the multilateral lender is giving Egypt time to meet targets.

At the meeting, originally due to be held this week, the IMF's executive board is expected to disburse a $820 million payment to Cairo.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.