EghtesadOnline: Consumer inflation in Iran registered a year-on-year increase of 50.4% in the Iranian month ending June 21, compared with the similar month of last year, the Statistical Center of Iran reported.
The overall CPI (using the Iranian year to March 2017 as the base year) stood at 174.9 in the month, indicating a 0.8% rise compared with the previous month.
The average goods and services Consumer Price Index in the 12-month period ending June 21 increased by 37.6% compared with last year’s corresponding period.
SCI had put the average annual inflation rate for the preceding Iranian month (ended May 21) at 34.2%, Financial Tribune reported.
Year-on-year and annual consumer price inflation measured for rural areas indicate higher rates than those in urban areas. The index registered a year-on-year increase of 49.3% for urban areas and 56.5% for rural areas compared with the similar month of last year.
The overall CPI reached 173.3 for urban households and 183.3 for rural households, indicating an increase of 0.8% for urban areas and 0.7% for rural areas compared with the previous month.
SCI put urban and rural 12-month inflation for the month at 36.9% and 41%.
The highest monthly inflation among 12 goods and services groups during the period was recorded for the “furniture, home appliances and their maintenance” group with a 2.6% increase.
The lowest monthly inflation among 12 goods and services groups was posted for “education” with 0.1%.
The “tobacco” group registered the highest and the “education” group posted the lowest year-on-year CPI increase among the 12 groups of goods and services with 109.6% and 21.3% respectively.
The average annual inflation rate of “tobacco” was the highest in the 12 months leading to June 21 with 124.9% and that of “education” had the slowest annual inflation rate with a 19.6% rise.
Risk of 50% Inflation on More Sanctions
Consumer prices could average 50% higher in 2019 after the US moved in April to end sanctions waivers granted to a handful of countries buying Iranian oil, says Jihad Azour, the head of IMF’s Middle East and Central Asia Department.
Before the announcement, the Washington-based lender had expected inflation to average 37%.
The US decision aims to slash Iranian oil exports to zero, starving the government of essential revenue as Trump seeks to curb the Islamic Republic’s political influence in the Middle East.
Even before the removal of waivers, the exchange rate had lost two-thirds of its value and “the economy was expected to go into a second year of recession”, the IMF official said in an interview in Dubai, the UAE, on Sunday.
While it’s hard to tell how high prices could surge, “it’s clear that the situation is expected to deteriorate”, he said.
Azour said Iranian authorities should take steps to alleviate the economic pain in the short run, including bringing the official exchange rate in line with market forces and address weaknesses in the financial system by complying with anti-money laundering and terrorism financing laws.
“Aligning the market and official rates will help tame inflation and reduce pressure on the exchange rate,” he said.
Authorities also need to “fix or expand their social protection mechanisms to address the additional vulnerabilities” for the poor, he said.
According to the World Bank's latest Global Economic Prospects report published in June, Iran’s inflation (year-on-year) has risen sharply from about 10% in mid-2018 to about 52% in April 2019, contributed by a depreciation of the rial in the parallel market of more than twofold compared to levels prior to the announcement of US sanctions in April 2018.
"Growth in Iran is expected to resume in 2020-21, albeit at weak rates, as the impact of US sanctions tapers and inflation stabilizes," the report said.
“A further amplification of US-Iran tensions would also pose risks for the region’s economies, other than Iran.”