Features

Worsening Inflation Casts a Shadow Over Iranian New Year

April 9, 2021
Bahram Khodabandeh
4 min read
The year 1399 saw the Iranian people experience the biggest inflation shock in contemporary Iranian history
The year 1399 saw the Iranian people experience the biggest inflation shock in contemporary Iranian history
The lowest-income households are now estimated to be spending around 40 percent of their income on food
The lowest-income households are now estimated to be spending around 40 percent of their income on food

The Iranian year 1399 (March 2021 to March 2021) broke all inflation-related records in the history of the Iranian economy. The outlook for the year 1400 is not much better.

Even the spokesman for the governor of the Central Bank  -2021-2022], on the other hand, has begun with no clear prospects for the Iranian economy, and the central bank governor's outspoken statements about money printing have raised concerns that another severe inflation storm may be brewing in the new year.

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The year 1399 saw the Iranian people experience the biggest inflation shock in contemporary Iranian history. The country experienced its highest single-year rate of inflation since the end of World War II, as well as the longest consecutive period of heavy inflation ever recorded: it has stood at above 25 percent, and at an average of 33 percent, for three years in a row.

Neither before the revolution nor even in the critical post-revolutionary period did Iran see such a surge in the average price of the household goods basket, to say nothing of critical services, both of which increased sixfold in a decade in the 2010s.

The Black Record of 2020-2021

This month, the Statistical Center of Iran published its February inflation report for 2020-21. In the history of the Islamic Republic the inflation rate has never exceeded 36 percent except for in 1995. But according to the Statistical Center’s report, this was the whole-year average inflation rate for 2020, while the country was in the grip of a pandemic.

The overall increase in March was steeper still, standing at 48 percent in urban areas and 53 percent in rural areas. In other words, in the interval of one year, the average price of goods and services increased 1.5 times. The average price of household food basket increased by 67 percent and the average price of non-food goods and services increased by 40 percent, at a time when wages were stagnating.

Iran’s Central Bank, whose calculated inflation rates are usually higher than those of the Statistical Center, has yet to publish a report.

Goods and Services Whose Prices Soared Last Year

According to the Statistical Center’s findings, the biggest price increase in 2020-2021 was observed in the transport sector, at 65 percent overall. It comes even as the prices of gasoline and petroleum products have apparently remained unchanged since November 2019.

The average cost of fruit and nuts soared by 50 percent in the same period. Dairy products also increased in price by an average of 49 percent, and beverages such as tea, coffee and soft drinks by 48 percent. Home appliances also increased in average cost by 47 percent and cooking oil by 45 percent.

House price inflation, which accounts for about a third of all household spending, is estimated to have increased by 27 percent in a year. This is far below the levels of rent inflation that have been published in the Central Bank's monthly and quarterly statistics reports.

Who Suffered the Most?

Across the board, urban areas appear to have experienced higher rates of inflation than in rural zones. The average inflation rate for the twelve months of 2020-2021 was 36 percent in urban areas and 38 percent in rural areas.

The Statistical Center’s report also explores the impact to different income groups in Iran. Based on its findings, the pressure on the three lowest-income deciles of Iranian society was significantly higher than the three wealthiest groups in March 2021. The poorest people spent an average of 40 percent of their money on food, compared to 25 percent by the richest.

What’s Next for an Inflation-Racked Populace?

The result of a combined 500 percent inflation and zero economic growth in the decade of 2011-2021 is a significant reduction in the purchasing power of the Iranian people. This is especially true of the lower-income and more vulnerable groups, who are now spending nearly half their household income on food.

Even the middle and upper classes are in a precarious situation. Save for the very wealthiest of Iranians, rising costs have also greatly reduced the ability of more comfortably-off Iranians to save, to the point that making rent, putting food on the table and paying medical bills has also become a serious challenge for many.

At the beginning of the Persian calendar year 1400, there is no clear vision for the economy. The chairman of the Central Bank’s recent blunt remarks, about the only solution being to “print money” to facilitate monthly government cash handouts to 60 million needy Iranians, indicate the severity of the storm that awaits in the coming year. The consequences of such a move would be far more frightening than the inflation rubble that has fallen on the heads of the Iranian people in the last three years.

Related coverage:

Ninety Days of Rocketing Dollar Value Compounds Iran's Inflation Nightmare

Iranians Enter a New Century Poorer and Less Hopeful for the Future

What did Iranians Wish For on New Year's Eve?

Most Tehran Residents Will Never be Able to Afford a Home

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