How will the Iranian economy and the livelihoods of Iranians fare in the coming years? Not a favorable one, given the current governing approaches and the dismal economic indicators. Note that over the past 50 years, inflation has been a fixture in Iran’s economy, an uninvited guest of Iranian families.
These were stated by Vahid Shaqaqi-Shahri, an economist, in an article for the Persian daily Ta’adol. A translation of the text follows:
Statistics show that long-term inflation in Iran has been 20%. It is perhaps among very few countries that has experienced double-digit inflation for years.
High inflation rates were registered in the fiscal 1994-95, 1995-96, 1973-74, 1974-75 and 1977-78. During the 2010s, however, the average inflation exceeded the long-term average of 27%.
With the reimposition of sanctions in the fiscal 2018-19, inflation rebounded and reached 40% over the past five years, i.e., twofold higher than the long-term average.
The economy is inflation-stricken and the blows of inflation have been largely dealt to low-income deciles, as high-income deciles have benefited from this inflation. This trend shows that Iran’s inflated economy is unable to fairly redistribute wealth
The main challenge is the permanency of this high inflation. According to the latest reports, inflation has hit 50% in the current Iranian year (started March 21). This trend is highly likely to persist until the end of the year. The figure is one of the highest in the world.
Only the fiscal 1995-96 saw an instance of such a high inflation. This will be repeated this year. These figures show that inflation in Iran is both long-lasting and high. The whole thing has resulted in a dramatic decline in the assets and savings of people.
Another painful reality is the unequal distribution of wealth. In fact, people suffer from two pains simultaneously. The economy is inflation-stricken and the blows of inflation have been largely dealt to low-income deciles, as high-income deciles have benefited from this inflation. The poor are the ones who feel the pain of poverty and inflation. This trend shows that Iran’s inflated economy is unable to fairly redistribute wealth.
The consequences of inflation also affect the middle-class and underprivileged deciles of the society. In the 2010s, the average inflation was 27% and the inequality intensified as well. The Gini coefficient has increased from 36.5 in the early years of the decade to 40 at the end of the decade. The figures show that the better part of the 2010s registered high inflation and because the wealth redistribution systems did not function properly, inflation was actually imposed on the middle class and low-income individuals, worsening the income gap.
People are destined to grapple with poverty, bigger income gap and lower purchasing power in the years to come. The government should focus on the root causes of inflation.
More importantly, now that it cannot control inflation due to sanctions, rising global prices and wars in other countries, it should make efforts to spread the effects and aftermaths of inflation fairly. It is unacceptable that the rich benefit from inflation through speculative practices, rent and corruption, while the poor are flattened by rising pressure. It is unfair and unjust.
