The World Economic Forum has published the Global Risks Report 2022, which tracks global risk perceptions among experts and world leaders in business, government and civil society.
Examining risks across five categories: economic, environmental, geopolitical, societal, and technological, the annual report also analyses key risks to explore further in deep-dive chapters. These include risks that feature prominently in the survey, those for which warning signs are emerging, or potential blind spots in risk perceptions.
The economic fallout from the pandemic, disorderly climate transition, digital dependencies and cyber vulnerabilities, barriers to migration and competition in space are among major global concerns, according to the findings of this report.
Covid-19 and its economic and societal consequences continue to pose a critical threat to the world in 2022. Vaccine inequality and a resultant uneven economic recovery risk compounding social fractures and geopolitical tensions.
In the poorest 52 countries — home to 20% of the world’s people — only 6% of the population had been vaccinated at the time of writing. By 2024, developing economies (excluding China) will have fallen 5.5% below their pre-pandemic GDP growth forecast, while advanced economies will have surpassed it by 0.9%, widening the global income gap.
Over a 10-year horizon, the health of the planet dominates concerns: environmental risks are perceived to be the five most critical long-term threats to the world as well as the most potentially damaging to people and planet, with “climate action failure”, “extreme weather”, and “biodiversity loss” ranking as the most severe risks.
Technological risks, such as “digital inequality” and “cybersecurity failure”, are other critical short- and medium-term threats to the world, but these fall back in the rankings over the long run and none appears among the most potentially severe, signaling a possible blind spot in risk perceptions.
Based on the findings of the report, the Research Center of Iran Chamber of Commerce, Industry, Mines and Agriculture has identified five main risks for Iran’s economy: employment and livelihood crises, widespread youth disillusionment, prolonged economic stagnation, natural resource crises and ecosystem collapse. National statistics confirm the truth of these concerns to the hilt.
Employment, Livelihood Crises, Youth Disillusionment
According to available statistics, the decline in unemployment rate since fiscal 2016-17 does not seem to be the result of the creation of full-time jobs; the share of the employed population who put in 49 hours of service per week hit the lowest in the 2010s; it has also continued a downtrend since 2017-18.
The number of those receiving unemployment benefits has increased and the number of insured workers has decreased. In 2020-21, unofficial employment accounted for 58% of the total number of employed people. These numbers suggest that the unemployment rate per se is not enough when it comes to analyzing employment.
A large number of jobs, particularly in the services sector, are highly vulnerable to sectoral and national crises, including pandemics or online restrictions.
The unemployment rate among young people in Iran (ages 18 to 35 years) stood at 16.6% in the first quarter of the current Iranian year (March 21-June 21), which indicate a 1% year-on-year rise, according to the Statistical Center of Iran.
For those between 15 and 24 years, the jobless rate was higher at 24%, registering a 1.9% increase.
With regard to livelihood, statistics show the Misery Index has doubled from 2016-17 to 2021-22, which is indicative of stagflation and the combination of unemployment and inflation.
The average income of urban household to the price of one square meter of a residential unit in urban areas has fallen to the lowest in the past decade; the ratio of net housing expenses to total expenses of urban household has increased 1.3-fold from 2018-19 to 2020-21.
The increase in housing expenses lowers households’ financial competence regarding other necessary expenses. Expenses outweigh income in rural households belonging to the first to fifth deciles and urban households grouped in first to third deciles.
Per capita consumption of meat, for instance, has decreased from 13 kg in 2012-13 to 6 kg in 2021-22. Per capita consumption of rice has dropped from 44 kg to 35 kg over the period under review. Food items have direct relation with the livelihood status of people; their prices have increased sharply between 2015-16 and 2021-22.
The ratio of divorce to marriage has doubled in the 2010s. The shares of expenses on cultural materials to households’ total expenses and the share of leisure and entertainment to households’ total expenses were 0.7 and 0.76 in 2019-20 compared with 2012-13, both registering a declining trend.
A total of 369,174 kg of drugs and psychedelics were seized in 2020-21 compared with the first year of the Sixth Five-Year Development Plan (2017-22). All these indicate that variables regarding mental health have deteriorated.
Changes related to income distribution do not show a sustainable improvement either. Except for a couple of years, Gini Coefficient — a measure of statistical dispersion intended to represent the income inequality or the wealth inequality within a nation or a social group — has increased over the years, indicating one of the causes of youth disillusionment in Iran.
Prolonged Economic Stagnation, Other Challenges
Economic growth (with or without oil) has seen ups and downs, given the dependency of Iran’s economic structure on foreign currencies, Covid-19 pandemic and sanctions.
During 2014-15 to 2018-19, the value of national currency was relatively stable; the pandemic had not started yet and the economy was enjoying the benefits of the nuclear deal. The economy expanded 13.9% in 2017-18 (economic growth without oil reached 9.3%). After that, the US dollar appreciated tenfold against the rial, the US withdrew from the deal, the Covid-19 outbreak started and production decreased.
All these are indicative of the fact that the production structure in Iran’s economy is vulnerable to the value of money and the country’s international situation. Business environment index fared worse in 2021-22 compared with 2018-19.
Natural Resource Crises, Ecosystem Collapse, Skyrocketing Prices
Statistics on water, climate, air, soil and waste substantiate concerns over natural resource crises, the risk of biodiversity loss and ecosystem collapse in Iran.
All in all, statistics corroborate the risks identified for Iran by WEF; the employment of well-thought-out plan is vital for Iran’s economy.
There are two other risks not mentioned in the report: the relentless increase in prices and the decline in trade, ICCIMA added.
Latest data released by the Statistical Center of Iran show the general goods and services Consumer Price Index (using the Iranian year to March 2017 as the base year) stood at 504.3 in the fourth month of the current Iranian year (June 22-July 22) to register a record high of 54% compared with the similar period of last year.
The highest year-on-year inflation was registered for the “food and beverage” group with 87% while “communications” saw the lowest YOY rate of 10.8%.
The month-on-month and annualized inflation stood at 4.6% and 40.5% respectively. The highest and lowest monthly growth in the index among 12 groups of the basket of consumer goods and services purchased by households in the Iranian month ending July 22 was recorded for “home appliances, furniture and maintenance” with 6.1% and “communications” at 1% month-on-month.
The highest and lowest annualized inflation rates were registered for “hotels and restaurants” with 65.9% and “communications” with 5%.
CPI hit 494.7 for urban households and 557.6 for rural households, indicating a month-on-month increase of 4.8% and 4.6%, respectively.
SCI put the annualized inflation for urban and rural areas at 40% and 43.2%, respectively.
The year-on-year inflation stood at 52.8% for urban areas and 60.7% for rural areas in the month.
Notably, the CPI for “food and beverages” stood at 780.2 in the month ending July 22, indicating a 5.7% increase from the previous month. The index registered a YOY increase of 87% and the CPI of the group increased by 55.1% in the 12-month period to July 22 YOY.
The rise in prices of goods and services accelerated at an unprecedented pace after the government decided to overhaul the import subsidy system.
The government move saw the abolition of the controversial practice of allocating cheap dollars at the rate of 42,000 rials per dollar, locally known as the Preferential Foreign Currency, to import essential goods, including corn, soymeal, unprocessed oil, oilseeds and barley, in addition to wheat, flour and medicine.
The market value of the dollar is above 300,000 rials now.
“Until now, we have been paying to producers [read importers] but now the subsidies go to consumers. In fact, the Preferential Foreign Currency has not been ceased, rather the allocation method has changed,” President Ebrahim Raisi said in a televised speech on the eve of the introduction of the move in May.
In his speech, Raisi emphasized that the removal of cheap dollar allocation will not lead to a price rise in wheat, flour and medicine.
However, the move led to a dramatic rise in the prices of essential goods.
Also known as necessity or basic goods, essential goods are products consumers will buy, regardless of changes in income levels.
In fact, the prices of all commodities and services have also risen suddenly in a ripple effect.
Decline in Trade
From fiscal 2011-12 to 2021-22, the general trend of real exports and imports of goods and services from/to Iran has been downward with the latter registering a more pronounced decline.
According to a new report released by Economic Studies Department of Tehran Chamber of Commerce, Industries, Mines and Agriculture, the goods and services exports in the fiscal 2011-12 stood at 2,530,000 billion rials at constant prices of fiscal 2016-17. The figure dropped to 2,220,000 billion rials in the fiscal 2021-22.
The average real annual growth of exports during the period stands at -29.1%.
The import of goods and services in the fiscal 2011-12 (at constant prices of fiscal 2016-17) was about 5,100,000 billion rials (almost twice the volume of exports in that year). It reached 1,280,000 rials (58% of exports) by the end of the period under review.
The average real annual growth of the imports was at -12.9%.
Intensification of sanctions, restrictions on access to foreign exchange resources and export earnings, and imposition of bans and restrictions on the import of certain groups of goods by the Iranian government played significant roles in shaping the country’s commercial landscape during the period.
During half of the decade from fiscal 2012-13 to 2021-22, the annual growth of goods and services exports was positive and during the other half, it was negative.
During this period, the annual growth of imports was negative in six years, while it was positive in four years.
From the fiscal 2014-15 to 2016-17, the annual growth of exports was positive and reached 27.4% in the fiscal 2016-17.
With the intensification of sanctions and restrictions on the export of some Iranian goods, as well as limitations in financial exchanges, the rate of export growth took on a downtrend as of fiscal 2017-18 and it became negative from the fiscal 2018-19 to fiscal 2020-21.
The average annual growth of exports was -11% during the three-year period.
During the same period, the average annual growth of imports was -30%.
In the fiscal 2021-22, the export’s average annual growth became positive after three consecutive years of negative trend and reached 5.2%. The growth of oil exports and non-oil exports were both effective here.
The average annual growth of imports was positive and stood at 24%, which is the highest figure from the fiscal 2011-12 to fiscal 2021-22.
From fiscal 2012-13 to 2021-22, the contribution of exports of goods and services to Iran’s economic growth was positive during the first half of the years under review and negative during the other half.
The contribution of imports to growth was positive for six years and negative for four years.
From the fiscal 2018-19 to fiscal 2020-21, the goods and services exports’ contribution was negative due to the intensification of sanctions and the decline in oil exports. This is while the role of imports was positive due to restrictions on some imported goods and decline in imports.
The average annual rate of goods and services exports was negative and stood at 1.3%, while it was positive for imports and hit 12.9% during the fiscal 2011-12 to fiscal 2021-22.
In the fiscal 2021-22, the increase in goods and services exports led to growth in the contribution of exports to economic growth and stood at 0.75% in the 4.7% economic growth.
The growth in imports also had a negative contribution to economic growth and stood at 1.71%.
In general, the net export of goods and services had a negative impact of 0.96 percentage points in the economic growth of fiscal 2021-22.
The TCCIM report cited a recent joint studies by World Trade Organization and the World Bank regarding the role of trade in developing economies and said the total share of developing countries in world exports increased from 16% in 1990 to 39% in 2021.
This, along with the growth of exports and a rise in their share in total global trade, led to the improvement of welfare and economic growth of these economies.
Export of goods from developing economies increased from $3.38 trillion in 2005 with a 2.8-fold increase to $9.6 trillion in 2021, and the export of services of these economies increased from $563 billion in 2005 with a similar growth rate to $1.6 trillion in 2021.
According to Iran’s foreign trade statistics, the export of goods and services did not play a positive role in generating economic growth; rather in certain periods, it has had a negative contribution to growth.
