Inflation and production took the center-stage of economic analyses immediately after Leader of the Islamic Revolution Ayatollah Seyyed Ali Khamenei named the new Iranian year (started March 21) as “Inflation Control and Production Growth”.
Inflation, as an indicator directly related to the lives and livelihoods of citizens, has gained prominence and attracted more attention.
Many experts tried to explore the causes behind inflation and the strategies to contain it by reviewing the path leading to its emergence in the past half century. But all analyses need documented information. We have to see what gave way to the peaks of inflation in our country in recent decades and how we’ll be able to resolve it, economic expert Mohammad Reza Monjazab prefaced his write-up for the Persian daily Ta’adol with this note. A translation of the text follows:
Between 1937 and 2022, inflation in Iran registered three historical peaks in the fiscal 1943-44, 1995-96 and 2021-22. The first inflation impulse was posted after Allied powers’ invasion of Iran. The second peak was scaled during the government of Akbar Hashemi Rafsanjani, known as Construction Government, and finally the third peak was hit in 2021-22. At present, the country is facing a system of misguided economic decision-making and sanctions. We also need to provide analytical evaluations regarding the 1960s, when the Iranian economy saw a single-digit inflation rate. During this decade, the Plan and Budget Organization, the Central Bank of Iran and other economic organizations were geared toward achieving development without oil. In fact, this decade should witness the decline and stability of inflation rate in Iran’s economy.
Iinflationary Commonalities
Each of these inflationary ups and downs has been the outcome of causes. However, they do share the following commonalities, given their special time and situation:
1. Severe budget deficit (resulting from the expansion of governments without productivity)
2. Limited foreign-source income
3. Governments’ lavish spending to solve the problems
4. Lack of detailed programs to redress inflationary conditions, and
5. Lack of development perspective and structural reforms.
The stark feature of the new inflationary era (starting 2018) is that the speedy increase in inflation has been unprecedented in the last 70 years. Given that the Iranian economy has continuously recorded high inflation rates for more than half a century and faced inflationary impulses except for a few years, it is important to survey the reasons behind this persistence.
Over the past five decades until March 2018, inflation averaged 18.1%. However, in the past five years, inflation has risen sharply, averaging 42.4%. In fact, inflation has outpaced its growth trend. In other words, inflation has been higher than the general trend in recent years; predictions are that it will accelerate even more by 2025-26. The distance between inflation and its trend is up to 10%.
Finally, detailed statistical investigations show that granted the distance between inflation and its trend, the inflation is bound to average 64% in 2023-24, i.e., 18% higher than the last year. If the government fails to implement plans to improve economic indicators, we have to expect another inflationary peak in Iran’s economy.
Of course, these analytical evaluations have been provided based on economic information of recent years; any new impulse in this process can change the analysis.
However, if necessary measures are not taken, Iran’s economy will witness higher inflation rates. And the emergence of inflation is synonymous with more poverty, more social ills, rising dissatisfaction and scores of other problems.
