Iran Economy News What Is the Inflation Rate on Iran’s Budget for...

What Is the Inflation Rate on Iran’s Budget for 2020–2021?

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Iran inflation rate

By Pooya Stone

The rise in the dollar and car prices and renewed orders to tighten price controls have raised concerns among many that a new inflationary wave is on the way in Iran.

Aside from the people’s perception of the street and the market, there are some indications, including a higher percentage of cash growth and, of course, the year-over-year budget deficit, which makes people’s concerns about annual inflation more serious.

Liquidity has grown by 28 percent this year. This was announced by the Minister of Economy, Farhad Dejpasand, and this has now raised concerns about rising inflation. Liquidity growth is at about 28 percent while liquidity has grown on average between 23 and 24 percent in previous years.

Peyman Molavi, secretary of the Association of Economists, wrote on his Instagram page that this could lead to inflation rising to as much as 50 percent or even 60 percent.

The budget of 2020-2021 is inflationary

Parviz Javid, a member of the Iranian Association of Economists, predicted the inflation rate in 2020: “The budget of 2020 of the entire country is inflationary. A budget with a deficit of at least 60 trillion tomans and more than this will be unrealized, and we will experience a deficit of about 130 trillion tomans and a budget deficit whose inflationary effects will inevitably affect the Iranian economy in the coming year.”

He continued: “If this budgetary procedure is carried out without reform, it is projected beside inflationary terms, the population table will shrink by 8 to 10 percent, and there is really no sign of the opposite showing the hope that inflation will decrease.”

This member of the Association of Economists emphasized: “This year, if inflation is to some extent reduced, sometimes it is due to the decline of the economic power and purchasing power of the people, not the power of economic instruments to control the inflation rate, and for the coming year, if the situation remains the same, in the most optimistic way, inflation is projected at 30 to 40 percent, and people’s purchasing power will continue to decline unless there are signs of improvement in Iran’s foreign relations and economic conditions, that’s not the case for now.”

The inflation rate will not jump

Economist Lotfali Bakhshi also explained about his prediction of the 2020 inflation rate: “The economic outlook for next year will not be much different from this year and it is expected that the economy and inflation rate will be the same.”

He added: “On the one hand, there is the issue of recession in the country, and on the other hand, the decline in the purchasing power of the people, which besides these two issues, for 2020 the government has been developing an expansionary budget, which partially offsets the effects of inflation. Inflation is unlikely to be higher than in 2020, and it is expected that inflation will remain at about 30 to 40 percent of inflation experienced in 2019, with no appreciable increase.”

“However, other things should not be underestimated, such as the increase in the monetary base that the government intends for 2020, as these will lead to inflation and so the decline in inflation that has occurred in some months this year because of the recession and reduced purchasing power will be offset by such things, and the  past year’s inflation peak will also be experienced next year.”

“In this context, and overall, expert opinion, it seems that if there is no change in the political situation of the country and nothing unexpected happens, the inflation rate will not decrease. At the same time, a price shock is not coming again and in fact, the inflation rate will not experience a shock again next year and the inflation rate will be around like the past year.”

Read more:

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