Inflation rate expected to rise further in coming months, economists say

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AMMAN — Official figures released on Tuesday show that the Consumer Price Index (CPI), a measure of inflation, rose by 2.62 percent in the first four months of 2022, to 104.58 points, compared to 101.91 points in the same period last year.اضافة اعلان

Economists interviewed by Jordan News said that the increase was expected, especially in light of the significant spike in the prices of foodstuffs and goods brought about by the war in Ukraine, income insecurity, the pandemic, and the global economic slowdown.

They also agreed that the recent rise in inflation is caused mainly by external factors, which is expected to continue to go up in the coming months.

Former banker Mufleh Aqel told Jordan News that a 2.6 percent rise is not huge, indicating that it “may reach 4 to 5 percent before the end of this year, especially that in strong economies like the US and a number of European states, the inflation rate has reached 7 percent so far.”

“This is imported inflation, especially since the prices of foreign goods are rising,” he said, adding that “there is no tool to control imported inflation”.
We import wheat, barley and oil, and thus the possibility of controlling inflation is difficult
“Inflation occurs when there is an increase in the prices of goods and a decrease in the purchasing power of the local currency, which affects aggregate demand, especially in the absence of a wage increase, and which will place a greater burden on those with limited incomes; it will also turn middle-income to low-income earners,” Aqel added.

He cautioned that it is difficult to find solutions to the rise in inflation, especially in a country that relies heavily on imports. “We import wheat, barley and oil, and thus the possibility of controlling inflation is difficult,” he said.

Economist Hussam Ayesh told Jordan News that the inflation rate is still within safe limits, but the fear is that it will continue to rise.

Ayesh said that “the high rate of inflation may exceed government expectations, especially since the government excludes from its calculations commodities whose prices fluctuate constantly, including foodstuff and energy”.

He stressed the importance of having statistical data that shows the extent of the rise in inflation when calculating the prices of all commodities.

According to Ayesh, inflation rates might continue to rise or remain at high levels in the coming months, stressing that “demand for goods did not return to its normal levels before the onset of the COVID-19 pandemic” and expressing hope that “the government has plans to confront upcoming price increases”.

Economist Wajdi Makhamreh told Jordan News that “the rise in the inflation rate in Jordan was expected in light of the global spike in prices due to the Russian-Ukrainian war”.

“Prices rose sharply due in large part to the jump in the price of oil derivatives, which are now the highest in the Arab world,” Makhamreh said.

“In the month of April, the inflation rate reached 3.59 percent, which is one of the highest rates Jordan has witnessed in several years,” he added.

Economist Mazen Irshaid told Jordan News that “the repercussions of the increase in inflation rate will be reflected on all economic sectors, in addition to individuals, companies, and the national economy itself”.

“The purchasing power will weaken more and companies will have to raise their prices to maintain their profit margins,” he said.

Irshaid said that the Central Bank of Jordan will be obliged to raise interest rates in the future in order to protect the Jordanian currency from losing more of its purchasing power.

“However, this step has disadvantages, especially on companies that depend on borrowing from banks. With the increase in interest rates, financing costs will rise. The same applies to consumers and citizens, and this leads to more erosion in the purchasing power,” he said.

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