Rice Prices Soar 60%, Beef 150% as Sanctions Fear Hits Iran's Economy
Summary
- Iran's currency value fell to a record low after the US signaled additional sanctions, reflecting fears that the Iranian economy could face a deeper shock.
- Since the war began, rice prices have risen about 60% and beef prices more than 150%, while the International Monetary Fund projects Iran's gross domestic product will shrink by more than 5%.
- The US Treasury secretary signaled tougher sanctions and a secondary boycott, while the United Arab Emirates announced a halt to all trade and financial transactions with Iran.
Forecast Trend Report by Period
Ahead of a new round of US sanctions on Iran that Washington has described as an "economic D-Day," Iran's currency fell to a record low. The drop reflects fears that an economy already strained by existing sanctions, maritime blockades and a prolonged war could face an even bigger shock.
When the unofficial foreign-exchange market opened on Aug. 24, the Iranian rial fell to 2.02 million per dollar. Iran's central bank sets the official exchange rate at about 1.5 million rials per dollar, but most Iranians rely on the unofficial market rate.
The rial had already been weakening before attacks by the US and Israel, under pressure from double-digit inflation and negative growth. The slide steepened as the war dragged on for about six months.
Prices are also surging. Since the outbreak of the war, rice prices have risen about 60% and beef prices more than 150%. The International Monetary Fund projects Iran's gross domestic product will contract by more than 5%.
Even so, Iran has maintained control over the Strait of Hormuz, a critical waterway. Before the war, about one-fifth of global oil shipments passed through the strait. During the conflict, Iranian attacks and threats have severely disrupted traffic there.
Treasury Secretary Scott Bessent has signaled tougher sanctions than those already in place in a bid to break the deadlock with Iran. The measures are also set to include a secondary boycott targeting countries that continue doing business with Tehran.
The United Arab Emirates announced last week that it would halt all trade and financial transactions with Iran. The UAE has been Iran's largest trading partner and biggest source of imports, while also serving as a key re-export and financial hub for Iranian companies.
Iran responded angrily. Foreign Ministry spokesman Esmail Baghaei said any action that worsens the situation would "without a doubt" come at a cost. "We are by no means standing idle," he added.
Shin Hyun-bo, Hankyung.com reporter, greaterfool@hankyung.com
Korea Economic Daily
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