Inflation shoots to 7.6 percent. Highest rate in five years

Inflation shoots
to 7.6 percent
Highest rate in five years
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The Consumer Price Index (CPI) surged 7.6 percent in July compared with the same month last year, according to the Central Administration of Statistics.

This is the highest inflation level recorded in five years, according to Bank Audi’s ‘Lebanon Weekly Monitor’.

All categories constituting the CPI basket witnessed an increase in their prices driven by additional taxes, hikes of teachers’ salaries, and continuing global rises in oil prices, Credit Libanais said in its latest ‘Weekly Market Watch’ report. The tax hikes include a ten percent increase in the Value Added Tax.

The food and non-alcoholic beverage category, whose weight in the calculation of the index is 20 percent, saw its prices rise six percent.

The impact of rising oil prices was significant on the subcategory of water, electricity, gas and other fuels whose prices surged 17 percent. This subgroup’s weight is nearly 12 percent.

Transportation cost, whose weight is 13 percent, was also affected by higher oil prices and jumped 12.9 percent.

The cost of health services rose 5.9 percent while the prices of clothing and footwear soared 14.6 percent. These two categories’ weights are 7.7 and 5.2 percent, respectively.

The subcategory of old rent, which is by law subject to annual increases, rose on average by ten percent over the period. This subcategory’s weight is just one percent.

Education costs rose four percent driven by the hike in teachers’ salaries both in public and private schools.

Both BMI Research and the Economist Intelligence Unit (EIU) expect inflation to ease over the period 2019/2020, according to Bank Audi. EIU has revised up its inflation forecast for 2018 to an average of 6.4 percent. It expects inflation to ease to an annual average of 3.9 percent over 2019-2020 as oil prices are anticipated to soften during that period.

Kamal Hamdan, Managing Director at the Consultation and Research Institute (CRI), said that the current high inflation level is likely to continue as a trend this year and probably next year. The new trend would hover around an inflation rate of seven percent instead of the previous 3-4 percent, according to Hamdan. “We live in a region where most of the national currencies have declined, and this would put pressure on the lira and consequently prices would continue to rise,” he said.
Reported by Shikrallah Nakhoul
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Date Posted: Sep 04, 2018