Exchange rate increases – Prices follow

Fatih Ermis

After remaining stable for over twenty years, the Lebanese currency started deviating from the fixed 1 USD = 1507 LBP exchange rate in September 2019. The relative price stability of the last two decades also faltered, which comes as no surprise, as Lebanon imports ten times as much as it exports. As will be discussed below, the price increases are lower than the increase in the exchange rate. This is especially the case for domestic goods, although it also applies to most exported goods.

In order to analyze price development in Lebanon, two supermarkets over two different periods, namely from 19 October 2019 to 20 April 2020 and from 20 April 2020 to 11 July 2020, will be examined.

From 19 October 2019 to 20 April 2020, the USD exchange rate increased by 187% from 1710 to 3200. However, as the chart below exhibits, the price increases in the same period are much lower than the change in the exchange rate. Up until April, there was hope that the increase in the exchange rate could be reversed.

The average increase in the price of items like bread, water, cheese, salt, sugar, fruit and vegetables is around 50%. The price of some imported items, such as Nescafé products, tripled in this period.

From 20 April to 11 July 2020, in less than three months, the USD exchange rate increased by 234% to reach 1 USD = 7500 LBP. The price development for selected items from another supermarket in Beirut in this period is displayed in the chart below.

Nutella experienced the highest increase with 285%. Items like bread, wheat, rice, milk, yoghurt, vegetables and fruit display lower price increases, on average around 60%.

One can also observe sizeable differences in the price adjustments of different supermarkets in different regions. Larger supermarkets tended to adjust their prices more quickly.


OpenEdition suggests that you cite this post as follows:
Max Weber Stiftung (September 21, 2020). Exchange rate increases – Prices follow. OIB_upclose. Retrieved July 19, 2024 from https://doi.org/10.58079/sijj


Max Weber Stiftung

The Max Weber Foundation promotes global research, focused on the areas of social sciences, cultural studies and the humanities. Our research is conducted at ten institutes in various countries across the globe with different and independent fields of focus. Through our globally operating institutes, we are able to contribute to the communication and networking between Germany and our host countries or regions. By promoting academic dialogue and merging academic and non-academic employees from several countries with different cultural backgrounds, the Max Weber Foundation is able to strengthen the internationalization of research.

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