Lebanon’s currency collapsed after escalating political and financial crises, with limited inflow of foreign currency. 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 147.55% in January 2021. 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.
Inflation rate in January 2021 registered a higher rate than the average inflation rate of 84.27% in year 2020. Accordingly, all sub-components of Lebanon’s consumer price index (CPI) increased over the studied period.
In details, the cost of “Housing and utilities”, inclusive of water, electricity, gas and other fuels (grasping 28.4% of the CPI) added a yearly 18.65% by January 2021, where “Owner-occupied” rental costs rose by 7.21% year-on-year (YOY) and the average prices of “water, electricity, gas, and other fuels” increased by 34.89% YOY.
Looking at the prices of “Food and non-alcoholic beverages” (20% of CPI), it surged by 395.29% yearly. 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 214.79%, 17.26% and 10.27%, respectively, by January 2021.
We also note that the costs of “Clothing and Footwear” (5.2% of CPI) surged by 597.23% by January 2021, and the prices of “Communication” (4.5% of the CPI) increased by 87.35%.
Worth mentioning, 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 627.16%, 226.04%, and 375.98%, respectively, by January 2021.
Lebanon’s annual inflation reached a record high, explained by the soaring prices of food and clothing by January 2021, highlighting the dramatic impact on household’s purchasing power. Moreover, 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.
Inflation rate by January
Source: BlomInvest, Central Administration of Statistics (CAS)