A currency exchange office in the Iranian capital, Tehran, August 2018. (ILNA)

By Ali Ranjipour

November 29, 2018

A government-run statistics unit has published its monthly report on Iran’s consumer price index, revealing a new hike in consumer goods — a rise in prices that is hitting lower-income families and rural communities hardest.

On Thursday, November 22, the Statistical Center of Iran published its monthly report. According to the study, the general price for goods and services has increased by a significant 34.9 percent since the same month one year ago. The report looks specifically at the cost of food, and reveals that inflation was actually higher for rural households — an abnormal situation that could have devastating consequences.

What Costs were Most Affected?

According to statistics published by the center, the highest increase in prices for consumer items related to food and beverages, which rose by 4.3 percent for the month and by a shocking 48 percent for the year. The lowest rate of inflation was seen in the housing and fuel sector, which rose by a little over 20 percent.

It is worth noting that housing and fuel costs make up the biggest share — almost one-third — of expenses for an average Iranian household. With this in mind, if the increase in the prices of housing and fuel equaled those in other sectors, this would amount to a much higher inflation rate in consumer items than the current 34.9 percent.

When it comes to food, prices for all items except bread, cereal and sugar rose by more than 43 percent for the year. Iranian households purchase bread and cereals more than any other food items. This means that if the inflation rate for these items had been similar to other items, the rate for food and consumer prices in general would have been much higher.

Rural vs Urban Areas

The statistics show that the inflation for the previous month, as with the month before it, was higher in rural areas than in urban areas. Rural households spent 37 percent more on consumer goods compared to the same month last year, whereas in rural areas the spending was around 34 percent more.

A high inflation rate in rural areas is not a normal phenomenon, and it can have devastating consequences. Usually, the cost of living and inflation linked to it is lower in rural areas than in the cities, but in recent months the reverse has happened, making the lives of Iranian villagers even more difficult.

For the last 50 years the increased migration from rural to urban areas has brought about one of the biggest social problems in Iran, and has led to social chaos and the expansion of margin-dwelling in cities. Up until recently, the main motivation for migrants has been perceived or real opportunities in the cities and the hope of having a greater income, but a higher cost of living in rural areas compared to cities is bound to make margin-dwelling even worse.

The Effects on Lower-Income Families

Considering that the increase in food prices plays an important role in the current structure of the country’s inflation, it is middle class and lower-income communities that suffer more; the impact on more affluent households is obviously less dramatic.

The above chart illustrates the increase in the cost of household expenditures for the Iranian calendar month of Aban 1397 (October 23-November 22, 2018). As can be seen, the inflation for the second to seventh deciles of the population are almost the same. Then it follows a downward path from the seventh to the tenth deciles, which refers the most affluent households. The first decile, the poorest one-tenth of the population’s households, stands out. The inflation for this decile of households is lower probably because they are forced to buy less food, and specifically less meat, fruit and fresh vegetables. They also spend comparatively less on bread and cereals.

The Inflation Crystal Ball

Not long ago, the website Rouhani Meter, which keeps scores on President Rouhani’s promises, estimated that if the monthly inflation rate remains at 2.5 percent, the annual rate of inflation, calculated by the Central Bank and the Statistical Center of Iran, would reach to between 27 to 30 percent. Five and a half years ago, when Rouhani was first elected to the presidency, he promised to bring inflation down to 25 percent. And during his campaign for the 2017 presidential election, he promised to keep the inflation rate to single digits. Neither promises have been fulfilled and, under current conditions, it is questionable whether they will be fulfilled anytime soon.

Iran Wire

About Track Persia

Track PersiaTrack Persia is a Platform run by dedicated analysts who spend much of their time researching the Middle East, in due process we fall upon many indications of growing expansionary ambitions on the part of Iran in the MENA region and the wider Islamic world. These ambitions commonly increase tensions and undermine stability.