Iran ranks 158 out of 162 countries and territories under review in Fraser Institute's Economic Freedom of the World: 2020 Annual Report, down 15 spots from 143rd in the previous year’s index.
The 2020 report of the Canadian think-tank and research firm, which employs data from 2018, shows that Iran ranked 158th in the world, among the 10 lowest-rated countries in terms of economic freedom, with a total score of 4.80 out of 10.
The degree of economic freedom is measured in five broad areas, namely size of government, legal system and property rights, sound money, freedom to trade internationally and regulation.
Iran’s ranking decreased in four areas, contributing to the overall decline. The five areas have several components and sub-components in each of them.
The first area includes government consumption, transfers and subsidies, government investment and top marginal tax rate, the second includes judicial independence, impartial courts, protection of property rights, military interference in rule of law and politics, the integrity of legal system, legal enforcement of contracts, regulatory restrictions on sale of real property and reliability of police.
The third area denotes money growth, standard deviation of inflation, inflation (most recent year) and freedom to own foreign currency bank accounts.
Tariffs, regulatory trade barriers, black-market exchange rates and controls of the movement of capital and people shape the fourth area while the fifth consists of credit market regulations, labor market regulations and business regulations.
According to the 2020 report, Iran grabbed a 5.87 rating to give it a rank of 117 in terms of government size. This was Iran's only improved area, as it had scored 5.46 and ranked 132nd in 2019 report.
In legal system and property rights, Iran's rating and ranking were 4.21 and 130th in the 2020 report respectively, compared to the score of 4.58 and the rank of 104th a year before.
In the area of sound money, the 2020 Fraser report gave Iran a rating and ranking of 6.17 and 154th respectively, compared to 8.01 and 105th a year earlier.
With regard to freedom to trade, Iran received a rating and ranking of 2.29 and 161st, down from the 4.93 and 155th of the 2019 report.
In regulation, Iran's rating and ranking were 5.45 and 149th in the 2020 report respectively, compared to the score of 5.60 and the rank of 148th a year before.
Although a fall of 15 spots in the Economic Freedom Index in a single year is worrisome, that is not the correct analysis of the report because changes in rankings of the countries this year are due to several changes made to the methodology adopted in the report. Therefore, this year’s rankings are not comparable with previous years, as the methods to calculate that has been changed considerably.
In fact, the report itself says that it can’t be compared with the 2019 report due to the changes.
It says, “In this year’s report, we have made key and important changes to nine components. This means that making comparisons for these variables [and for the associated area and summary ratings] between the 2019 report and this 2020 report will be extraordinarily difficult.”
It further adds, “It is impossible to make so many changes without an impact on the ratings and rankings of the countries in the EFW index. While most nations’ ratings and rankings change only modestly, there are a few that are affected to a fairly significant degree. While this is unfortunate, we are confident the revised index is more accurate, as it is based on more and better-quality underlying data.”
Hong Kong and Singapore top the index, continuing their streak as first and second respectively. New Zealand, Switzerland, the United States, Australia, Mauritius, Georgia, Canada and Ireland were the top 10.
The 10 lowest-rated countries were: Central African Republic, Democratic Republic of Congo, Zimbabwe, Republic of Congo, Algeria, Iran, Angola, Libya, Sudan and Venezuela.
The report says nations that are economically free outperform non-free nations in indicators of well-being.
Nations in the top quartile of economic freedom had an average per-capita GDP of $44,198 in 2018, compared to $5,754 for nations in the bottom quartile (PPP constant 2017)
In the top quartile, the average income of the poorest 10% was $12,293, compared to $1,558 in the bottom quartile (PPP constant 2017). Interestingly, the average income of the poorest 10% in the most economically free nations is more than twice the average per capita income in the least free nations. In the top quartile, 1.7% of the population experience extreme poverty ($1.90 a day) compared to 31.5% in the lowest quartile.
Life expectancy is 80.3 years in the top quartile compared to 65.6 years in the bottom quartile.
