After weeks of delay, the Statistical Center of Iran has finally published data on inflation in the last fiscal year (March 2022-23).
The new report, published simultaneously with inflation statistics of the first fiscal month, puts last year’s rate at 45.8%, with that of rural areas standing at 50.6% and urban areas at 45%.
The new data, presented in a different format from previous such reports, have revised down the monthly inflation rates from previous rounds, while the coefficients for the 12 categories of surveyed goods and services have also changed.
“The official explanation [for the delay] is that SCI was in the process of changing the base year for CPI from 1395 [fiscal 2016-17] to 1400 [fiscal 2021-22]. Five-year updates are normal and necessary because the expenditure weights used to calculate CPI change over time,” said economist Djavad Salehi Isfahani on his weblog recently.
“Presumably, they are being recalculated using the household budget survey for 1400, which was concluded a year ago. Has there not been enough time to estimate the new weights?”
The SCI report, which came after the Central Bank of Iran’s narrative, said the country experienced 46.5% in average annual inflation in the last calendar year that ended on March 20, 2023.
CBI said the Consumer Price Index stood at 794.3 in the 12th month of the year, indicating a 6.6% rise compared to the previous month.
The bank did not report on the year-on-year inflation in the 12th month. It surveys CPI for 12 groups of goods and services. Notably, the “food and beverages” group registered an annualized inflation rate of 54.6%.
“Transportation”, “health and medical care”, “clothing and shoes”, “home appliances and services”, “communications”, “entertainment and cultural affairs”, “education”, “restaurant and hotel”, “tobacco”, “housing and utilities (water, electricity, gas and other fuel)” and “miscellaneous goods and services” registered 32.3%, 41.9%, 45.9%, 33.3%, 19.3, 37.8%, 35.1%, 80%, 28.8%, 48.3% and 38.3% respectively.
“Housing and utilities” with 37.05%, “food and beverages” with 25.51% and “transportation” with 8.9% have the highest coefficient among the groups surveyed.
“Rivalry between the two government agencies [SCI and CBI] over inflation reporting has a history, and for a while CBI stopped publishing its own inflation rates so as to not create confusion in the single most important economic statistic that the government puts out. For a long time, the two rates offered very similar trends, which presented no problem. If anything, it was reassuring to have two independent series tell the same inflation story. But, since 2018, for reasons that I do not know, the two urban CPI series began to diverge. In 2021, the CBI index exceeded SCI’s by 31%,” Isfahani said.
“Globally, food prices are on decline, though Iran’s prices are more closely linked to the exchange rate, which has its own dynamics. In the meantime, all estimates of living standards, real wages and poverty rates, include mine, may have to be recalculated. This is one revision that Iran can do without, since the confusion that already exits over the status of Iran’s economy — collapsing or not — has confounded the public debate. Speaking of confusion, I am surprised to see that CBI’s estimate of economic growth in the first nine months of last year [March-December 2022] is higher than SCI’s [3.7% vs. 3.3%] despite CBI’s higher inflation estimate. True, the CPI and GDP deflator measure different things, but still I expected the opposite,” he concluded.
Abolition of Import Forex Subsidy
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 530,000 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 last year.
In his speech, Raisi emphasized that the abolition 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.
Month to April 20 Data
The data for the month to April 20 (the first month of the new Iranian year) also differs from the usual reporting format.
SCI says CPI rose 3.7% compared to the month before. It also says the month-on-month CPI rise was at 4.7% in the previous month (the last month of the preceding Iranian year). The data lack any information on annualized or year-on-year CPI rise or its breakdown for urban and rural areas.
Other findings of the new report show:
The highest monthly inflation was registered for “transportation” with 8.6% while “education” registered the lowest monthly rate with 0.3%.
With a coefficient of 28.82%, the monthly inflation of “food and beverages” stood at 4% in the month ending April 20 and 6.9% in the previous month.
The monthly inflation of “tobacco” was 4.4% in the month ending April 20. The tobacco index, which has the least impact on the total inflation rate with a coefficient of 0.62%, registered a 4.9% monthly inflation in the month ending March 20.
With a coefficient of 4.52%, the monthly inflation of “clothing and shoes” stood at 3.2% in the month to April 20 and 7.5% in the previous month.
The monthly CPI rise of “housing and utilities (water, electricity, natural gas and other fuels)” stood at 2.2% in the first month of the new year. The group’s CPI index, which has the biggest impact on total inflation rate with a coefficient of 36.11%, registered a monthly inflation rate of 2.2% in the month ending March 20.
With a coefficient of 4.4%, the monthly inflation of “furniture, home appliances and their maintenance” was put at 2.7% in the month to April 20 and 4.9% in the previous month.
It stood at 2% for “health and medical treatment", with a coefficient of 6.68% in the first month of the new year and 1.3% in the month before.
With a coefficient of 8.93%, “transportation” experienced an 8.6% monthly CPI rise for the month to April 20 and 7.1% for the previous month.
The monthly inflation of “communications” stood at 1.9% and with a coefficient of 2.41%, the rate was put at 5.2% in the month ending March 20.
For “leisure and culture”, with a coefficient of 0.87%, it stood at 4% and 5% respectively. With a coefficient of 0.88%, the rate was put at 0.3% in the month to April 20 and 0.2% in the previous month.
For “hotels and restaurants”, with a coefficient of 1.35%, it stood at 5% and 6.1% respectively. And finally for the so-called “miscellaneous goods and services” with a coefficient of 4.42%, the monthly CPI rise reached 7% in the month to April 20 and 5.3% in the previous month.
