TehranOn March 13, the Governor of the Central Bank of Iran, Mohammad Reza Farrazin, submitted a comprehensive report on the economic situation during the last 9 months of 2024.
The report stated the following:
- Economic growth and fixed capital formation
The Iranian economy witnessed a growth of 3.7% during this period. The rate of fixed capital formation increased by 3.4%, which reflects the increase in investment in various economic sectors. - The volume of non -oil trade
The volume of non -oil trade recorded 11.2%, exceeding $ 116 billion. This rise indicates the improvement of trade relations and the expansion of non -oil exports. - The inflation rate for consumers
The inflation rate for consumers decreased from 55.7% to 35.4%, which reflects an improvement in price control and relatively stability in the consumer market. - Monetary liquidity growth rate
The rate of cash liquidity growth decreased to 27.6%, which may contribute to controlling inflation and achieving more economic stability. - Future credit policies
The central bank is working on developing credit policies for the next year that focuses on supporting production and financing small and medium enterprises through new financing mechanisms, which can contribute to enhancing economic growth and creating job opportunities. - The continued decrease in inflation in the production sector
The inflation rate in production costs continues its descending direction, indicating a decrease in production costs and the improvement of the economic conditions of producers.
Oil revenue addiction
In an interview with Al -Jazeera Net, the economy professor Mortada, his horizon, presented an analysis of the current Iranian economic situation and future expectations based on various scenarios, stressing that the historical dependency of oil revenues is still the largest weakness of the country’s economy, which makes it fragile to the sanctions and external political developments.
His horizon believes that the dependency on oil revenues, which was a problem before and after the Iranian revolution, did not decrease as expected, but rather turned into economic addiction, which made Iran very influenced by international political relations, especially with the developed countries that buy Iranian oil and provide basic commodities for industry, agriculture and services.
Scenario
The Iranian economy professor explains that the future path of the economy depends on the nature of the relationship between Tehran and Washington, and raises two major scenarios:
1) If an agreement is reached between Iran and the United States
Some economic indicators are expected to improve, but in a limited way. Even just talking about a possible agreement may lead to relative stability in the markets, especially the exchange market.
However, there will be a fundamental improvement unless the sanctions are fully lifted, so that Iran can export its oil and import goods freely.
2) If an agreement is not reached and the penalties continue
His horizon expects the economic crisis to worsen, with an increase in the rate of inflation and the exchange rate. It is possible that the price of the dollar will exceed 100,000 Iranian riyals (currently 42 thousand), while the government’s ability to intervene will remain limited.
Due to the dependence of industrial and agricultural production on imported materials, the continuation of the sanctions will lead to a crisis in the local production sector.
Financial deficit and inflation: How did successive departments affect?
His horizon indicates that Iranian governments, from the time of Hassan Rouhani and even the government of President Ibrahim Raisi, faced an increasing deficit in the budget, which led them to borrow from the central bank, which caused inflation to rise to unprecedented levels exceeding 50%.
The cancellation of government support for the exchange rate (42 thousand riyals for the dollar) caused a sharp rise in food prices, as the inflation rate in this sector reached more than 60%.
As for the government of President Masoud Bouchakian, he took power at a time when the state treasury was almost empty, amid the escalation of regional tensions, including clashes between Israel and the collapse of Bashar al -Assad’s regime in Syria, which increased political and economic pressures on Tehran.
Trump and the escalation of economic pressure
His horizon believes that Donald Trump’s victory in the US presidency and reactivating the policy of “maximum pressure” against Iran has led to major turmoil in the Iranian exchange market in recent months, as the value of the dollar has increased to unprecedented levels, which affected the purchasing power of citizens and increased inflation.
Where is the Iranian economy heading?
In his evaluation of the future, his horizon confirms that the continuation of the sanctions means the continued deterioration, as inflation may exceed 45%, while the dollar price may rise to 130-150 thousand riyals.
In the event of a diplomatic breakthrough and the lifting of sanctions, the economy may stabilize somewhat, but it will not witness a significant improvement unless Iran is reintegated into the global economy and allowed to sell oil freely and import goods without restrictions.
The Iranian economy between external pressures and the opportunities for recovery
The Iranian economy has witnessed many fluctuations during the past years, as it has been closely related to politics over the past decades. In this context, economics professor Isaac Saidian believes that the coming months may bear additional challenges, especially in light of Western sanctions and increasing American pressure.
“For the past 20 years, Western countries have imposed, along with the United States, the most economic sanctions on Iran. However, after Biden’s arrival to power, his administration tried to reduce the severity of sanctions, especially in the energy sector. But with Trump’s return, we may witness a new tightening of international sanctions, which may exacerbate pressure on the Iranian economy,” said Saidian, in his interview with Al -Jazeera Net.
https://www.youtube.com/watch?v=3jzklyjpotg
The weaknesses of the Iranian economy
On the most prominent weaknesses of the Iranian economy – as the economy professor explains – the weakness of the national currency is a major challenge, as Iran, despite its large population, recorded weak economic growth rates, which led to a decline in the value of the riyal against foreign currencies.
It also refers to the government budget deficit as one of the main problems, explaining that the public budget enlargement in recent years was not accompanied by a clear approach to its financing, while the decrease in oil revenues has exacerbated this deficit. “If the current situation continues without a breakthrough in relations with the United States, it is likely that Iranian oil exports will decrease more, which will increase the budget deficit.”
With regard to inflation, Saidian explains that the inflation rate in Iran exceeded 50%, which is a dangerous number that has not been controlled through effective economic policies, noting that a large part of this inflation “is caused by unaccounted cash liquidity, which led to high prices and low purchasing power.”
As for foreign investment, it witnessed a significant decline, as the economy professor indicates that many foreign investors have started to withdraw their capital from the Iranian market due to the high economic risks. An example of this is set by the withdrawal of the Saudi Sofayy Company from the Iranian market after Trump’s victory in the presidency.
Future strengths and expectations
Despite these challenges, Saidian believes that there are strengths that can support the Iranian economy if they are effectively exploited. He explains that Iran has a young and educated working force, which gives it an opportunity to enhance local production if the appropriate conditions are available.
It also indicates the enormous natural resources that Iran enjoys, such as oil, gas and minerals, can make it one of the richest countries in the world if it is invested properly.
Expectations
With regard to the near future, Saidian expects the riyal to witness a further decline during the next three months, especially if the current political and economic pressures continue. But he adds, “We may witness relatively stability in the exchange rate in the following months, in the event of the Iranian Central Central intervention to control the financial market.”
In conclusion, he stresses that the improvement of the Iranian economy depends heavily on the country’s ability to reach long -term political agreements with the West and the United States, noting that achieving such agreements can put Iran on the path of rapid recovery and make it one of the most prosperous countries in the Middle East.
