Lebanon has overtaken Zimbabwe and took the second place in the ranking of the world’s highest inflation rates after Venezuela. According to the Central Administration of Statistics (CAS), the Consumer Price Index (CPI), which gives an overview about the evolution of goods and services’ prices consumed by households, revealed that Lebanon’s monthly inflation rate surged from 10% in January 2020 to reach a dramatic level of 145.8% in December 2020. For decades, the fixed exchange rate regime has helped in maintaining average annual inflation rate at about 3% but starting 2020, Lebanon’s currency depreciated sharply and made imports much more expensive driving about half of the population into poverty.
Lebanon’s average inflation rate in year 2020 climbed to 84.27%, up from lows of 2.90% registered for year 2019. Accordingly, all sub-components of Lebanon’s consumer price index (CPI) increased over the studied period.
In details, the average cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 7.66% by year 2020, where “Owner-occupied” rental costs rose by 5.39% year-on-year (YOY) and the average prices of “water, electricity, gas, and other fuels” increased by 10.49% YOY.
Looking at the average prices of “Food and non-alcoholic beverages” (20% of CPI), it surged by 253.96% in year 2020. 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 hikes of an annual 85.46%, 10.07% and 5.74%, respectively, in year 2020.
We also note that the average costs of “Clothing and Footwear” (5.2% of CPI) surged by 300.52% in year of 2020, and the prices of “Communication” (4.5% of the CPI) increased by 66.09%.
Worth mentioning, average prices of “Furnishings and household equipment” (3.8% of CPI), Recreation, amusement, and culture” (2.4% of the CPI), and “Alcoholic beverages and tobacco” (1.4% of CPI) increased by 395.69%, 120.27%, and 285.30%, respectively, in year 2020.
The Lebanese Pound has soared to an unprecedented low-level in the free market and the inflation is surging while Lebanon’s politicians fiddle rather than initiate the needed rescue and recovery to save Lebanon. Noting that, till today, BDL continues to subsidize essential goods in order to control the catastrophic effect of the depreciation of the Lebanese Pound. However, BDL’s support will definitely come to an end and the real (non-subsidized) inflation rate will go higher than ever and it may overpass Venezuela’s rate.
Yearly average inflation rate
Source: BlomInvest, Central Administration of Statistics (CAS)