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Iran’s Economy at a Crucial Phase

Recent developments have left the Iranian economy at a critical phase contrary to claims of the government-linked institutes

Whereas, Iran’s latest budget has a deficit of some 100-150 trillion tomans, shutting down of many businesses due to the coronavirus outbreak, imposing an expensive health expenditure to the government,

dropping of oil price, and the government’s inability to collect taxes, Iran’s inflation rate won’t be reduced and it is predicted that a tough economic year is waiting for the country.

The Statistical Centre of Iran predicted that the inflation rate will reduce in the next season and the Parliament [Majlis] Research Center also claimed that Iran’s economy has experienced zero growth in the current year without considering oil exports. These statements are raised while the country is passing a critical situation, including the sudden drop in global oil prices, the budget deficit, and an unprecedented recession that the COVID-19 has imposed on the Iranian economy and small businesses.

Government-linked economic experts, of course, reject these hypotheses and believe that “On the ground, not the paper, economic conditions in Iran will much tougher, and the working class of society and low-income earners will be the most vulnerable strata in the next year [in Persian Calendar].” Contrary to Iranian institutes’ claims, given the country’s many problems, a positive development would achieve through a change in commercial interactions between Iran and the world.

The Inflation Rate Will Reduce to Half

While the inflation rate has reached 40 percent in the current year, however, the Statistical Center of Iran and the Majles Research Center forecasted that this rate will decrease to 25 percent in the coming year. Furthermore, the Statistical Center accounted for four scenarios for this anticipation.

All of these scenarios are based on previous years’ stats; however, the country is not in the same stage and all those developments have resulted in such an inflation rate that is unprecedented in Iran’s history.

Simultaneously, economic experts reckoned that the inflation rate won’t correspond with the Statistical Center’s anticipation. As a necessary step, this center should specify how it calculated this amount and which sources have been used for these estimations?

Additionally, the stats show that the country will have a tough economic year. The government faces at least a budget deficit estimated between 100-150 trillion tomans according to president Hassan Rouhani. Also, as the country scrambles with the coronavirus, it needs to dedicate huge resources to provide necessary health items in addition to pre-emptive measures – something it has not done. On the other hand, the oil price has dropped, and the government cannot basically account for oil revenues given the U.S. sanctions. Meanwhile, given the shutdown of small businesses, the government will be crippled in collecting taxes.

In such circumstances, observers predict that the inflation rate would remain on 35-40 percent at the best-case scenario, which would cause a reduction in the people’s capability for purchasing their essential goods. Also, experience has shown that the inflation rate always climbs in the spring rather than decrease, according to the Statistical Center’s assumption.

Why Is ‘Zero Economic Growth’ in Iran Only an Illusion?

Iran’s Statistical Center has also assumed that the last year’s economic growth with the oil revenue was -7.2 percent and without oil, revenue was zero percent. In addition, the information about the economic growth reveals that the Domestic Gross Product (DGP) has dropped seven percent in comparison with the last year.

These stats say that the pros and cons of oil exports are imbalanced, which means the oil exports’ disadvantage of Iran’s oil-dependent economy is more than their advantage. This is an absolute disaster for a country that rested on a sea of oil and probably has no other income.

Notably, the Statistical Center didn’t revise its prediction after the coronavirus outbreak that had an irreparable impact on Iran’s calamitous economy. Also, the country’s entry onto the Financial Action Task Force (FATF) blacklist was another harsh blow to the Iranian economy that eliminated any ray of hope and distanced the ayatollahs’ strategic allies more.

 

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