EghtesadOnline: The average goods and services Consumer Price Index in the 12-month period ending Aug. 22 increased by 42.2% compared with last year’s corresponding period, the Statistical Center of Iran's latest report shows.
SCI had put the average 12-month inflation rate for the preceding Iranian month, which ended on July 22, at 40.4%.
Consumer prices registered a year-on-year increase of 41.6% in the Iranian month ending Aug. 22 compared with the similar month of last year.
The overall CPI (using the Iranian year to March 2017 as the base year) stood at 180.8 in the fifth month of the Iranian calendar year, indicating a 0.6% rise compared with the previous month, Financial Tribune reported.
Year-on-year and annual consumer price inflation rates measured for rural areas were higher than those in urban areas.
The index registered a year-on-year increase of 40.8% for urban areas and 46.1% for rural areas compared with the similar month of last year.
The overall CPI reached 179.7 for urban households and 187.1 for rural households, indicating an increase of 0.7% for urban areas and 0.3% for rural areas compared with the previous month.
SCI put urban and rural 12-month inflation for the month under review at 41.4% and 46.6% respectively.
The highest monthly inflation among 12 goods and services groups during the month-long period under review was recorded for the “furniture, home appliances and their maintenance” group with a 2.3% increase.
The transportation group posted a deflation of 0.7%.
The “furniture, home appliances and their maintenance” group registered the highest and “education” group posted the lowest year-on-year CPI increase among the 12 groups of goods and services with 71.3% and 23.3%, respectively.
The annual inflation rate of “tobacco” group was the highest in the 12-month leading to Aug. 22 with 112.1% and that of “education” groups had the slowest annual inflation rate with a 21.2% rise.
Effect of Sanctions
Tighter US sanctions against Iran could fuel inflation to the highest level since 1980, the International Monetary Fund announced.
“Consumer prices could average 50% higher this year after the US moved in April to end sanctions waivers granted to a handful of countries buying Iranian oil,” said Jihad Azour, the head of the IMF Middle East and Central Asia Department.
Before the announcement, the Washington-based lender had expected inflation to average 37%, Bloomberg reported.
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. The grim outlook would put Iran’s inflation on par with crisis-hit Sudan and only behind Venezuela and Zimbabwe, two countries caught up in political turmoil, IMF data show.
Even before the removal of the waivers, the exchange rate had lost two-thirds of its value and “the economy was expected to go into a second year of recession”, Azour said in an interview in Dubai.
While it’s hard to tell how high prices could surge, “it’s clear that the situation is expected to deteriorate”, he added.
Forecasts released before the US decision show Iran’s gross domestic product set to contract 6% this year from 4% in 2018 before a marginal recovery in 2020. The oil price needed to help the country balance its budget was forecast to rise to $125.6 a barrel from $113.8 in 2018 and $64.8 the previous year. Brent crude prices closed at $72.15 a barrel on Friday.
In its latest Global Economic Prospects report published in June, the World Bank forecast Iran's GDP to contract 4.5% in 2019 after having experienced an estimated -1.9% growth in 2018.
Forecasts for 2020 and 2021 are at 0.9% and 1% respectively.
"In Iran, the impact of US sanctions is projected to peak this year, with growth resuming in 2020," the report reads, adding that the sanctions are inhibiting investment.
According to the report, Iran’s year-on-year inflation has risen sharply from about 10% in mid-2018 to about 52% in April 2019, contributed by a more than twofold depreciation of the rial in the parallel market 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, noting that further amplification of US-Iran tensions would pose risks for the region’s economies other than Iran.
The International Monetary Fund has forecast a deepening recession for Iran's economy this year, projecting real GDP growth of -6% in 2019 after a contraction of 3.9% the year before.
In its latest "World Economic Outlook" report, the IMF sees growth will come back at a meager rate of 0.2% in 2020 before increasing to 1.1% in 2024.
Central Bank of Iran’s Governor Abdolnasser Hemmati recently said CBI "has managed to quell the fear of turning into a second Venezuela in terms of inflation", ILNA reported.