Features

Prices in Iran Continue to Soar Despite Better Exchange Rates

January 22, 2021
Bahram Khodabandeh
3 min read
The cost of goods in Iran rose by about 10 percent in the first month of winter, even as the price of the dollar fell by 17 percent
The cost of goods in Iran rose by about 10 percent in the first month of winter, even as the price of the dollar fell by 17 percent
In Iran about 3 percent of household expenditure per month is spent on milk, cheese and eggs alone
In Iran about 3 percent of household expenditure per month is spent on milk, cheese and eggs alone

The average price of the dollar in the first month of winter decreased by about 17 percent compared to the first month of autumn. According to Iran’s Central Bank statistics, in September last year the average price of the US dollar was 29,342 tomans on the black market. The average market price in January has reached 25,000 tomans.

However, a recent report by the Statistical Center of Iran shows that the average price of goods and services in the country increased by about 10 percent in the same period. Food has risen by about 20 percent in the past three months, and non-food goods and services by about four percent.

The cost of living in Iran continues to rise despite the fall in the value of the dollar. While in recent months the devaluation of the rial against foreign currencies has dragged everything down like a heavy anchor, even with the dollar depreciating the situation has not improved.

The inflation report for January 2021 shows that although the monthly inflation rate has decreased considerably to below two percent, inflation is still above 46 percent. Even if we assume that prices will not change by the end of the year, if the situation continues in the same way and with a gentle slope, the rate in the year 2020-2021 will be above 36 percent. However, in Iran's volatile economy there is no guarantee that a sudden shock will not make things worse than they already are.

 

Inflation Above Targets

What is certain is that inflation in 2020-2021, in the best conditions, is about four times the inflation target predicted in the Sixth Development Plan and 6.1 times higher than the "inflation target" set in early June last year. The Central Bank was supposed to adjust monetary policies to keep inflation down to 22 percent by the end of the year, but this did not happen.

A comparison of urban and rural areas shows that the rate of inflation in rural areas is much higher than in urban areas, with inflation in rural areas reaching about 50 percent, as opposed to 45.5 percent in urban areas.

Among foodstuffs, the highest annual inflation is in the "oils and fats" group, which saw a 90 percent price increase over the past year. Next is "fruits and nuts" with an increase of 78 percent, then "milk, cheese and eggs", up 73 percent.

Among non-food goods, one-year inflation in the transport sector is at a record rate of 63 percent. After that the "recreation and culture" group experienced the highest non-food inflation at 55 percent. According to household budget estimates, about one-tenth of Iranian household expenditures are spent on transportation and less than two percent on recreation and culture.

 

Official Statistics in Question

The report of the Statistical Center indicates that although the monthly inflation rate (the rate of increase in prices compared to December 2020) decreased compared to the previous month, the vast majority of goods and services saw price increases.

Among foodstuffs, dairy and egg prices rose the most over the past month, with inflation up by about nine percent. On average, about 3 percent of household expenditure per month is spent on milk, cheese and eggs. The "oils and fats" group saw the next highest monthly inflation rate of 8.3 percent: one of the most essential items on the household table, which has become a full-blown crisis in recent months.

Some items such as meat (white and red) and vegetables decreased in price compared to December. Monthly inflation for meat was down seven percent and vegetable inflation was down one percent, pending verification.

There have been sporadic reports of rising meat prices in the first week of January and rising chicken prices in the last week. The Statistical Center of Iran claims that the food and services price index reports are accurate and correct, but many are skeptical of the accuracy of official statistics.

 

Related coverage:

Government Study Shows Up to 34.8 Percent Inflation Rate in Parts of Iran During the Pandemic

Is There any Hope of Reining in Iran’s Runaway Inflation?

Can Iran Survive Record Inflation?

Inflation Hits Iran’s Most Vulnerable as Crisis Continues

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