Hike in global freight prices cause increase in inflation rate

Prices worldwide have increased due to the unprecedented hike in international shipping rates. (Photo: Shutterstock)
AMMAN — The rise in the Consumer Price Index (CPI) in Jordan is one of the direct repercussions of COVID-19, which resulted in a dramatic surge in international freight rates, experts said on Monday.اضافة اعلان

According to a report by the Department of Statistics, the CPI increased by 1.25 percent in the first 11 months of 2021 to reach 102.36, compared to a CPI of 101.10 for the same period in 2020.

The CPI is a measure that examines the average prices of a number of consumer goods and services, such as transportation, food, and medical care.
Prices worldwide have increased due to the unprecedented hike in international shipping rates, Chairman of the Jordan Chamber of Commerce (JCC) Nael Kabariti told Jordan News, on Monday.

The rates of shipping containers from China have jumped from $2000 to $12,000, according to Kabariti.

He said that in some countries, prices have gone much higher than in Jordan, with many countries struggling to provide essential goods to consumers.
Economist Mazen Irsheid said that crude oil prices had recorded a large increase since the beginning of this year.

Given that Jordan imports 94 percent of its oil needs, the price increase will reflect all commodities, directly and indirectly, Irsheid explained.
In addition, global prices of foodstuff have recorded the biggest hike in ten years, according to Irsheid. He warned of an expected shrink in the purchasing power if the inflation rate continues to rise.

Muflih Aqel, a banker, expected the CPI to continue to rise over the coming years as a result of the so-far unresolved global freight prices and raw material issues, both of which have disrupted the supply chain.

When countries lifted lockdowns, there was an immediate rise in demand for raw materials, leading to the increase in freight prices, Aqel said.
This jump in the CPI will lead countries to increase interest rates in order to control inflation, Aqel said.

Irsheid called on the government to reconsider custom taxes to encourage local production and eventually make Jordan less prone to international price fluctuations.

He also urged the authorities to focus on green economy solutions while decreasing taxes on EV’s and hybrid vehicles.

Irsheid said that Jordanian people should reconsider their consumption patterns and rearrange their needs according to their incomes.
Such projects would contribute to reducing the oil bill and enhance Jordan’s role in combating climate change.

On the other hand, Kabariti said that the General Budget for 2022, discussed on Monday at the Lower House, should focus on increasing funds to support the economy and reducing taxes on commodities to boost consumers' purchasing power.

He called for increasing capital expenditure for job-generating projects that would decrease unemployment.

Irsheid said that the General Budget should support local industries by regulating imports and creating mega projects that are sustainable and provide permanent jobs.

During a press conference on Sunday, Finance Minister Mohammed Al-Ississ stressed that the government is committed not to raise taxes in the 2022 budget, adding that the policy of combating tax and customs evasion has enabled the government to continue not to impose any new taxes.

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