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Iran’s Inflation Rate Soars To Nearly 35%

The Bazaar in Tabriz, northwestern Iran. July 2018.
The Bazaar in Tabriz, northwestern Iran. July 2018.

The Iranian Statistical Center has announced that the inflation rate in Iran for the period between 23 October and 22 November has risen by 34.9 percent compared to the same period last year.

The center has calculated the rise in the inflation rate based on price indexes for consumer goods and services.

This means that Iranian families have spent nearly 35% more on the same goods and services as they had during the same period in 2017.

Compared to the previous month, the rate of inflation has risen by 2.1 percent, said the Iranian Statistical Center.

Meanwhile, the center's report puts the rise in inflation during the year before 22 November at 15.5 percent compared to the same period in 2017.

Iran's economy suffers from structural problems but the reimposition of U.S. sanctions have played a major role in the devaluation of Iran's currency contributing to the rapid rise in inflation.

The center's itemized report, shows a 50.3 percent rise in the prices of foodstuff, beverages and tobacco compared to the prices of the same goods in the same period previous year, while the monthly rise in these prices has been as high as 29 percent.

The steep increase has been attributed to the soaring prices of meat, fish, fresh and dried fruit as well as dairy products.

The highest rise during the past month in the prices of consumer goods other than food was reported to be in furniture, home appliances, clothing and footwear sectors.

In the meantime, compared to prices in the previous year, the highest overall price rise was that of tobacco products which showed a 160 percent hike. This was followed by the 63.5 % rise in the prices of entertainment products and leisure services.

Prices rose following several waves of unprecedented increases in the foreign exchange market, where the Iranian currency rial was hammered badly. The money supply also grew exponentially as the government kept printing money to finance its budget deficit during the past year.

Although state officials have spoken about the government's plans to control foreign exchange rates, statistical reports indicate that inflation will more likely get worse in coming months.

As the Iranian government's previous initiatives to control the rates of exchange and inflation rates have invariably failed, economists have been warning about hyperinflation of up to 65 percent.

President Hassan Rouhani has ruled out the danger, calling the economists "liars."

He said during a parliamentary session in late October while introducing his new ministers that "Those who warn against hyperinflation either lie, or don not understand Iran's economy."

Ironically, it was Rouhani's new economy minister Farhad Dejpasand who said at the Iranian Parliament that Iran was facing hyperinflation.

The term "hyperinflation" became popular in the Iranian media after an economic publication quoted Steve Hanke, an economics professor in Johns Hopkins University, using the term when he said in the summer of 2018 that he believed the annual inflation rate in Iran was 151 percent.

During the past year, economic hardships, including unemployment and rising prices have led to repeated mass protests in Iran. In one of the latest cases of labor unrest, workers of a sugar mill in Khuzestan province in southwestern Iran have been protesting against unpaid wages and mismanagement of the factory for several weeks now.

In the meantime, Iranian media occasionally warn about the economy getting increasingly similar to Venezuela’s as it is heading toward an inflation figure between 50 to 65 percent.

Some market observers have opined that the news of rising inflation inevitably agitates the markets, giving rise to higher prices and inflation rates.