According to the Central Administration of Statistics (CAS), the Consumer Price Index (CPI) gives an overview about the evolution of goods and services’ prices consumed by households, which revealed that Lebanon’s monthly inflation rate surged from 10% in January 2020 to reach a dramatic surge of 136.8% in October 2020. This surge is a result of the accelerating economic, financial and political crises, recording the highest inflation rate since the aftermath of the country’s civil war. In fact, for more than 20 years, the fixed exchange rate helped Lebanon to maintain average annual inflation at about 3%, however, since the start of year 2020, Lebanon’s currency depreciated sharply and made imports much more expensive.
Lebanon’s average inflation rate in the first ten months climbed to 73.20%, up from lows of 2.47% registered by October last year. Accordingly, all sub-components of Lebanon’s consumer price index (CPI) increased over the studied period.
In details, the average costs of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 5.98% by October 2020, such that “Owner-occupied” rental costs (13.6% of Housing and utilities) rose by 5.02% year-on-year (YOY) while the average prices of “water, electricity, gas, and other fuels” (11.8% of Housing & utilities) increased by 7% YOY. Moreover, average prices of “Food and non-alcoholic beverages” (20% of CPI) surged by 220.19% by October 2020. In fact, Lebanon’s currency depreciation made imports more expensive, driving half of the population into poverty; struggling to provide their basic needs; as estimated by United Nations agency.
In turn, the average prices of “Transportation” (13.1% of the CPI), “Health” (7.7% of the CPI) and “Education” (6.6% of CPI) all recorded upticks across the board, increasing by an annual 67.66%, 8.61% and 4.81%, respectively, over the period despite lower oil prices.
We also note that the average prices of “Recreation, amusement, and culture” (2.4% of the CPI) remarkably increased by 20.4% from month of September to reach 240.26%, however the prices of “Communication” (4.5% of the CPI) dropped by 0.5% to reach 124.40% by October 2020.
Notably, the average costs of “Clothing and Footwear” (5.2% of CPI) surged by 252.46% by October 2020 down from 562.05% by September 2020. Similarly, average prices of “Furnishings and household equipment” (3.8% of CPI) and “Alcoholic beverages and tobacco” (1.4% of CPI) increased by 334.92% and 220.19%, respectively, by October 2020.
It is worth mentioning that the CAS disclosed in its latest statistics that many of the prices provided for March, April and May 2020 were missing, namely the following CPI components: Restaurant and hotels, Furnishings & household equipment, Clothing and footwear, as well as F&B. Therefore, the agency had to input its own figures to calculate the corresponding inflation rate for the period.
The Lebanese situation could further deteriorate and inflation rates move higher as political and financial crisis continue with no solution in sight, and in case BDL stops subsidizing the import of essential goods at the official exchange rate which will lead to elevating prices to higher levels. Therefore, several steps should be taken by the government to control inflation rate; Government should support the industry sector in Lebanon with a clear goal to import less and export more. By this act, the country will need less foreign currency reserves and therefore inflation rate will decrease.
Average inflation Rate by October (%)