The economic advisor to Iranian President Ebrahim Raisi recently revealed a forecast for macroeconomic indicators until the end of the year, which has raised numerous questions and objections.
Despite the regime’s relentless advertising and state-run media propaganda claiming an improved economic situation, while even some of them falsely portray the country’s economic situation as flourishing, the reality in the country’s markets points to an inflation rate of at least 50 percent and an exchange rate setting new records each day.
Vahid Shaqaghi Shahri, a regime economist, has raised some noteworthy points regarding the statements made by Raisi and his economic deputy. While Raisi has been claiming that liquidity in the country has decreased, his economic deputy recently expressed concern about the 56 percent growth in the money supply over the past 7 months and the state of the economy in the coming year. This apparent discrepancy in their positions has drawn attention, and Shaqaghi Shahri has weighed in on the matter.
According to Shaqaghi, the increase in inflation rate and liquidity has resulted in the growth of the monetary base, which in turn leads to further increases in liquidity and significantly impacts inflation rates. He has raised doubts about the accuracy of the statistics published by the regime’s Central Bank and emphasized that while regime officials may choose to ignore reality, they cannot ignore the consequences that follow such ignorance.
Shaqaghi referred to Masoud Nili’s statements, the former Special Assistant to the President for Economic Affairs, and added that if the reported 50 percent growth in the monetary base is indeed a reality, it will inevitably manifest itself in the growth of liquidity. As a result, the regime will have to face the consequences of such liquidity growth, which will be reflected in the increase in inflation rates.
Shaqaghi also pointed out that the effects of the basic law in monetary equations on inflation levels should be demonstrated in the medium term, and sometimes even within a shorter period of three to six months. In light of Nili’s claim about a 50 percent growth in the monetary base, Shaqaghi emphasized that the current state of the country’s economy is in a state of emergency, and if the trend continues, there is a possibility that the regime may face hyperinflation in the coming year.
Shaqaghi went on to explain that it is important to first clarify the definition of hyperinflation, which occurs when the monthly inflation growth rate exceeds 50 percent for several consecutive months. Referring to the current high and consecutive levels of inflation, he emphasized that a 50 percent inflation rate is already considered high. He warned that if the regime fails to implement budget and banking discipline, address the imbalance in retirement funds, and address exchange rate imbalances in this severe situation, the regime may face the same level of inflation or even higher in the coming years.
It is worth noting, based on Shaqaghi’s statements, that the regime currently faces challenges in settling its foreign debt, which stands at approximately $9 billion, due to the sanctions imposed because of the regime’s insistence on its nuclear program and its human rights violations, particularly in the context of the recent protests.
Additionally, the ratio of the government’s and its affiliated companies’ domestic debt to the gross domestic product is about 33 percent, which will directly and significantly impact the inflation rate. However, it is surprising to note that some of the regime’s economists deny this reality.
Furthermore, the constant increase in the exchange rate in the Iranian market is also having a significant impact on increasing the inflation rate. The growth rate of the exchange rate in recent months, particularly in October and November of 2022 when the dollar rate increased by over 40 percent, is a cause for concern. In recent days, the exchange rate has surpassed 48,000 tomans, and it is clear that this increase in the exchange rate will have far-reaching effects on the inflation rate, which do not require deep analysis to understand.
The impact of the increase in the exchange rate is initially observed in the asset and currency markets and eventually in the goods and services market. As we have witnessed, the increase in the exchange rate has affected the gold market initially, followed by the automotive and housing sectors. Inevitably, it will also have an impact on goods and services markets in the coming days.
According to Shaqaghi’s statements, there is a possibility of a 3.5 percent monthly inflation in January and February, which means that by the end of the year, inflation could reach around 50 percent. Despite these obvious facts, Raisi’s administration, ministers, and propaganda arms are trying to downplay the critical economic situation that the country is facing. However, it is the people who are experiencing this harsh reality and becoming poorer every day.