Does Rouhani have Control over Inflation — or Public Opinion?

The second anniversary of President Rouhani’s presidency is upon us. Political tensions, at least as far as foreign affairs are concerned, have subsided. In other areas, Iran is no longer confronting the big challenges it faced prior to  2013. People seem happier. And recently, in a television interview, Rouhani spoke about controlling prices and inflation.

But official statistics tell a different story. Either the government of former president Mahmoud Ahmadinejad was not providing correct data about Iran’s economic situation, or both Rouhani’s administration and the people of Iran are not as sensitive to price changes as they were between the years 2009 and 2011.

For Iranians, “inflation” is not just an abstract economic concept, it is an everyday anxiety. For the people, it is synonymous with “high prices,” and for politicians, it is a tool for politics. Government officials can declare any rate for inflation that they like, but for the past many years, people believe in what they experience at the cash register.

In today’s Iran, inflation can be viewed from different angles: the reality that people experience, what they think about it and, last of all, what is officially announced.

 

The Weight Multiplier

We cannot generalize about what people experience across Iran, or what they feel about it. Naturally, an increase in the price of eggs does not mean the same thing for a villager as it does for the resident of a small town.

But villagers, residents of small towns and people in big cities like Tehran and Isfahan are faced with a single number — the inflation rate — which dominates discussions among ordinary people.

When Ahmadinejad was Iran’s president, the reality of this number, at least for the middle class, was always beyond comprehension. The government’s economic experts manipulated it in a way that, when it was given to the president, he could boast about it during TV interviews. Their tool was the “coefficient” used to give weight to various categories. In June 2009, for instance, they used a coefficient of 29 to calculate for inflation in the “housing, water and energy” category. But since 2013, this weight multiplier has been changed to 33.

So what happened? In 2009 and 2010, Iran witnessed considerable increases in housing and energy prices, but since 2013 prices in this particular category have remained relatively stable.

So the rate of inflation is calculated not only by actual price changes in a category, but also by the weight — or importance — given to each category, using the multiplier mentioned above.

Of course, the weight multiplier is a scientific tool used all around the world — but it is the actual numbers that have been used that have always been controversial in Iran. It is quite clear that changes in chocolate prices do not have the same “weight” in people’s lives as do changes in prices of housing. Therefore, coefficients are necessary to account for these differences.

 

Wrong Data or Popular Illusion?

Looking at price changes in selected categories published by the Iranian Central Bank, we can see that, compared with the first two years of Ahmadinejad’s second term (June 2009 to June 2011), the first year of Rouhani’s government performed better in the categories of “food and drink,” “electricity, gas and fuels,” “cost of education” and “transportation.” But in 2009 to 2011, the first two years of Ahmadinejad’s second term, his government performed much better when it came to controlling the prices of “clothing,” “housing,” “health,” “communication” and “culture and entertainment”.

Still, it would appear that, currently, people feel better overall. What can be the reasons for this contradiction? Either the information the government published for the period 2009 to 2011 was wrong — or the Iranian people are too influenced by psychological and political factors.

Published data show that, in terms of commodity prices and services for city households, Rouhani’s government performed somewhat similarly in its first two years as did the government of the first two years of Ahmadinejad’s second term. There is one exception to this: the figures for electricity and fuel, which are directly related to the withdrawal of subsidies, which occured in the first two years of President Ahmadinejad's second term.

The table below compares changes during the two periods:

 

Category	Pct. of Change in the 1st 24 months of Rouhani’s government	Pct. of Change in the 1st 24 months of Ahmadinejad’s 2nd Term
Food & Drink	26	40
Clothing	37	30
House Ownership	33	15
House Rentals	32	14
Electricity & Fuel	28	276
Health	71	43
Transportation	43	44
Communication	8	2
Culture & Entertainment	42	26
Education	26	28
Total Index	33	32

 

On Household Expenses and Rouhani’s Government

If, in June 2013, a hypothetical household of four needed 2 million tomans ($672) for its monthly expenses, in June 2015, the same family needed 2.7 million ($910) to live at the same level because, in the intervening 24 months, the prices of commodities and services have increased by 33 percent.

According to the Iranian Central Bank, since Rouhani assumed presidency in 2013, healthcare prices have increased by 71 percent. Next come “transportation” and “culture and entertainment,” with increases of 43 and 42 percent respectively.

According to government statistics, going to doctor now costs around twice as much as it did two years ago. Yet Rouhani’s administration has repeatedly said that one of its main focuses is to improve health services.

None of the comparative statistics published show a marked improvement in controlling inflation. Nevertheless, it seems that people have a more positive attitude toward the economy.

Of course, it cannot be denied that the general rate of price increases is now considerably more under control than it was, and economic prospects have improved. But just looking at the figures tells a somewhat more  different story.

 

Related articles:

Iranians Battle With High Unemployment and Soaring Inflation

Public Anger over Rising Cost of Chicken

 

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