The inflation rate will fall below 25% in the next Iranian year (starting March 21, 2022) unless special conditions prevail, says Vahid Shaqaqi-Shahri, an economist and university professor, in an article for the Persian-language daily Ta’adol.
The Statistical Center of Iran’s latest report on inflation says the annualized inflation has maintained its monthly downtrend after registering a high of 45.4% in the month ending Oct. 22.
The average goods and services Consumer Price Index in the 12-month period ending Feb. 19 increased by 41.4% compared with the corresponding period of the year before, marking the fourth consecutive month of decline.
A translation of the article follows:
Given the significant increase in the prices of oil and oil derivatives and the increase in foreign-source revenues, Iran’s economy will be in a much better shape next year. Besides, revival of the Joint Comprehensive Plan of Action would have a significant impact on inflation and the prices of goods and services.
We might end up with a deal offering us minimum opportunities; some sanctions might remain in place, but given the rising prices of oil and oil products and the impact of the Ukraine-Russia war on energy prices, as well as geopolitical factors, I don’t expect the oil price to decrease next year. As a result, foreign exchange resources will improve and if the nuclear deal is revived, the economy will become more transparent.
Market prices will resist the change in foreign exchange rate. Iran imports many goods, the increase in global price of which influences prices, i.e., the import prices of raw materials, intermediate goods and final goods will increase.
Given the significant rise in the prices of oil and oil derivatives and the likely revival of the nuclear deal, Iran’s economy will be in a much better shape next year
Also, the fact that many of our consumer goods and raw materials or intermediates are being procured via import, when the global prices increase and transportation costs go up, consumer prices will resist the expected decline.
The market prices are currently resisting the depreciation of foreign currency since the future of nuclear deal and sanctions has yet to be determined. The ambiguity regarding the nuclear deal has kept the market aflutter. Producers and investors are in anticipation, and all of this has boosted the resistance against the decline in the prices of goods, services and assets.
Global prices have risen as a result of global inflation. Inflation has reached 7% in the US following the outbreak of Covid-19. There is less talk of the pandemic in the world; the global consumer demand has increased and prices are on an uptrend as the world gets closer to the post-Covid era.
Iran’s inflation is bound to fall below 25%. In recent months, global oil prices have risen and because Iran’s is an oil-driven economy [95% of our non-oil exports are in fact petroleum products], I expect foreign exchange earnings to improve next year.
The 40,000-rial decline in the value of US dollar over the past month, following [positive] signals from Vienna, where nuclear talks are taking place, has reduced inflationary expectations to an extent. Normally, such a decline in foreign exchange rate should have affected the prices of goods, services and assets.
Remember the fiscal 2016-17 when the nuclear deal was finalized and inflation had dropped to 9%. Inflation requirea structural reforms in banking and trade sectors. I expect the rising trend in the prices of oil and petroleum products and the revival of nuclear deal would lower inflation expectations.
Next year’s inflation rate could reach 15-20%. Factors such as budget deficit, disagreement over the nuclear deal, the global economy and the uncertainty that exists in the world economy can all lead to an inflation rate of 15-20% next year.
Last week, President Raisi emphasized the importance of reducing costs. He called on government organizations to prevent speculative practices and price growth, especially in the runup to the Iranian New Year [starting March 21]. He also tasked the ministries of agriculture and industries to conduct a thorough, expert investigation into the price increase despite the declining trend of foreign currency exchange rates and put forward their recommendation to the economic headquarters of the government.
