Needy People Hardest Hit by Inflation

EghtesadOnline: The Statistical Center of Iran has released inflation rates for each of the 10 deciles in which Iranian households are categorized on the basis of their income.

News ID: ۷۸۲۰۶۲

14 March 2018

The average goods and services Consumer Price Index in the 12-month period ending Feb. 19, which marks the end of the Iranian month of Bahman, increased by 9.2% for the first decile (those with the lowest income), whereas it rose by 7.7% for the 10th decile (those with the highest income), compared with last year’s corresponding period.

The inflation rate for the second to ninth decile stood at 9.1%, 9%, 8.9%, 8.8%, 8.7%, 8.6%, 8.4% and 8.2% respectively.

The highest overall CPI (using the Iranian year to March 2017 as the base year) stood at 111.6 for the second decile and the lowest index was 110.9 for the 10th decile. The smallest and biggest monthly changes of the index have been registered for the first decile (0.1%) and the 10th decile (0.5%), according to Financial Tribune.

Income deciles have resulted from ranking either all households or all persons in the population in the ascending order according to income, and then dividing the population into 10 groups, each comprising approximately 10% of the estimated population.

The SCI released inflation rates based on income deciles for the first time in late December, showing low-income households are taking the brunt of rising prices.

According to Javad Hosseinzadeh, the deputy head of SCI, the initiative will enable the government to locate the target population of its welfare policies and develop better plans for both high- and low-income households’ consumer basket—a sample of consumer goods and services used to track prices.

SCI also shifted, as of last month, the base year for releasing its CPI statistics from the fiscal 2011-12 to the last Iranian year that ended on March 20, 2017.

As per SCI’s latest announcement, the average goods and services Consumer Price Index in Iran over the 12-month period ending Feb. 19 increased by 8.3% (irrespective of income deciles) compared with last year’s corresponding period, the Statistical Center of Iran reported. The inflation rate shows a 0.1% increase compared to last month.

SCI put urban and rural inflation rates for Bahman at 8.2% and 9.1% respectively, which show a 0.1% increase for urban areas and a 0.1% decrease for rural areas compared to last month.

The overall CPI (using the Iranian year to March 2017 as the base year) stood at 111.2 in Bahman, indicating a 0.3% rise compared with the previous month.

The year-on-year increase in inflation was at 8.2%--8.4% for urban areas and 7.4% for rural areas, indicating a decline of 0.3%, 0.1% and 0.8% compared to last month respectively.

The Iranian economy has been beset by high inflation rates compared to the world average. A point-to-point inflation of 45% was handed to President Hassan Rouhani in June 2013 by his predecessor.

However, the incumbent president managed to gradually rein in the runaway rate and bring it down to a single digit territory for the first time after about a quarter century in June 2016. The rate has been hovering around 10% ever since.

Donya-e-Eqtesad Media Group analysts expect inflation to remain below 10% by the end of the current fiscal year (March 20, 2018) for a second consecutive year.

Inflation in Iran reduced to a single digit for the first time after about a quarter century in June 2016.

However, experts and economists at the Fifth Iranian Economy Overview Conference, which was hosted by Donya-e-Eqtesad on Tuesday, were unanimous that inflation is likely to rise well above 10% in the next fiscal.

“Inflation will average at 23.5% during 2018-21, with the prerequisites being an average 10% annual increase in investment, 3.2% economic growth, and average liquidity growth of 27.2%,” said professor of economics at Sharif University of Technology, Mehdi Barakchian, in an address to the conference.

The World Bank is expecting Iran’s inflation rate to reach 11.5%, 10.9% and 10.6% in 2017, 2018 and 2019 respectively.

The International Monetary Fund projects that the inflation will pick up temporarily in 2018-19 from 9.9% in 2017-18.

And, in its latest World Economic Situation Prospects, the United Nations has forecast a 5.3% economic growth for Iran in the current fiscal (ending March 20), expecting the rate to settle at 5.1% and 5% over the two subsequent years respectively.