Iran's Inflation Hits New High

EghtesadOnline: The latest data released by the Statistical Center of Iran show the annualized inflation reported by the center on a monthly basis has reached a new high.

News ID: ۷۵۲۲۰۵

27 January 2023

The latest data released by the Statistical Center of Iran show the annualized inflation reported by the center on a monthly basis has reached a new high.

The average annualized inflation in the 10th month of the current Iranian year (Dec. 22-Jan. 20) stood at 46.3%, SCI said in a new report released on Sunday.

Only in the fiscal 1995-96 and 1996-97 did Iran experience inflation rates above the current level.

Notably, this is the eighth consecutive month the annualized inflation is rising after the government put into effect what it touted as “economic surgery” by abolishing the heavily subsidized import of essential goods.

The general goods and services Consumer Price Index (using the Iranian year to March 2017 as the base year) stood at 587.4 in the month under review, indicating a month-on-month rise of 4.3% and a year-on-year rise of 51.3%.

Among 12 groups of goods and services reviewed by SCI, the highest and lowest annualized inflation rates were respectively registered for “hotels and restaurants” with 75.1% and “communications” with 8.8%.

The highest and lowest MOM inflation rates were respectively registered for “transportation” with 11.9% and “education” with 0.3% month-on-month, respectively.

“Hotels and restaurants” with 78.4% and “communications” with 12.8% saw the highest and lowest YOY inflation respectively.

The CPI hit 578.5 for urban households and 637.1 for rural households, indicating a month-on-month increase of 4.3 and 4.3%, respectively.

SCI put the annualized inflation for urban and rural areas at 45.5% and 50%, respectively. The year-on-year inflation stood at 50.6% for urban areas and 54.9% for rural areas in the month.

The rise in prices of goods and services accelerated at an unprecedented pace after the government decided to overhaul the import subsidy system.

The government move saw the abolition of the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as the Preferential Foreign Currency, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine.

The market value of the dollar is currently above 380,000 rials.

“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move in May.

In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour and medicine. However, the move has led to a dramatic rise in the prices of essential goods. In fact, the prices of all commodities and services have also risen suddenly in a ripple effect.

Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.

Below are details of price changes experienced by the 12 groups of consumer goods and services surveyed by SCI:

With a coefficient of 26.64%, the CPI of “food and beverages” stood at 870.4 in the month ending Jan. 20, indicating a 4.1% increase from the previous month. The index registered a YOY increase of 70.1% and the CPI of the group increased by 65.7% in the 12-month period to Jan. 20 compared with the corresponding period of last year.

The CPI of “tobacco” was 783.8, indicating a 2.8% rise from the previous month. The tobacco index, which has the least impact on the total inflation rate with a coefficient of 0.59%, registered a YOY increase of 33.5%. The annualized CPI of the group grew by 40.7% compared with the corresponding period of the year before.

With a coefficient of 4.78%, the CPI of “clothing and shoes” reached 668.8, indicating a 2.9% increase over the previous month. The index registered a YOY increase of 45.7% in the month under review. The average annual CPI of the group jumped by 47.1% from last year.

The CPI of “housing and utilities (water, electricity, natural gas and other fuels)” stood at 369.6, indicating a 2.5% rise compared with the previous month. The group’s CPI index, which has the biggest impact on total inflation rate with a coefficient of 35.5%, registered a YOY increase of 37%. The annualized CPI of the group was at 32.3%.

With a coefficient of 3.93%, the CPI of “furniture, home appliances and their maintenance” was 703.1 – up 2.9% on the previous month. The group’s CPI registered a YOY increase of 34.9% while the average annual CPI of the group increased by 33.8% over last year.

The CPI of “health and medical treatment" was 473.1, indicating an 3.9% increase from the month before. This index, with a coefficient of 7.14%, registered an increase of 53.8% compared with the similar month of last year. The group’s annual inflation during the month was 39.4%.

With a coefficient of 9.41%, the “transportation” CPI was 725, up 11.9% on the month before. This index registered a YOY increase of 46.9% and its annualized CPI increased by 37.8%.  The CPI of “communications” stood at 210.4, up 2.7% compared with the month before. With a coefficient of 2.87%, it showed a YOY increase of 12.8% while the annualized inflation reached 8.8%.

The “leisure and culture” CPI stood at 634.3, indicating a 3% rise compared with that of the previous month. With a coefficient of 1.65%, it saw a YOY increase of 31.7%, as its annualized inflation hit 30.5%.

With a coefficient of 1.86%, the CPI of “education” was 354.4, indicating a 0.3% rise from the month before. The group’s CPI index registered a YOY increase of 31.9% while the annualized CPI of the group surged to 31.1%.  The “hotels and restaurants” CPI came in at 766.6, up 3.9% over the previous month. With a coefficient of 1.44%, the YOY increase was 78.4% and annualized inflation was at 75.1%.

The CPI of goods and services in the “miscellaneous” group was 570.5, indicating a 3.5% growth compared to the previous month. With a coefficient of 4.18%, this index was up 38% and its average annual inflation hovered near 35.5%.