Economy, Business And Markets

Curing the Recession First

Curing the Recession First  Curing the Recession First

Countering the deep and lingering recession stalking the economy should be the government’s top priority, Heidar Mostakhdemin Hosseini, a senior economist said.

“The long-running recession has, among other things, spread disappointment, cut payrolls and created corruption,” he was quoted as saying by Mehr News Agency.

He pointed to the government’s anti-inflationary policies saying that curbing inflation should not be seen or sold as an achievement when in actuality there is a deep recession and companies are reporting unusually high inventories. “The government should take measures to help revitalize the economy and encourage companies to revive their business,” he said, without offering viable solutions.

More recently economic experts have called on the government to cut taxes, stimulate consumer demand, ease labor laws and above all encourage small and medium enterprises that have emerged as the engines of growth in many countries, including some developed economies.

Asked about the government’s stimulus package, Hosseini said the move was not effective because it sought to salvage the saggieng auto and home appliance industries. “The package aimed at helping automakers and home appliance manufacturers sell their goods. This was not what the economy and the people needed,” he expounded.

Late last year the CBI released details of a credit card scheme saying it will be valid for purchasing goods made by domestic manufactures. Later foreign products were also added to the scheme, albeit at a higher interest rate.

The scheme is a part of government stimulus package, unveiled last October, which will provide credit card holders a maximum 100-million-rials ($3,000) at 12% to buy domestically-made goods.

The auto loan scheme provided buyers with up to 250 million rials ($8,370) with an interest rate of 16%. The payback period is a maximum seven years or 84 installments. However, the loan scheme ended in less than a week after applications exceeded the 110,000 ceiling. 

 Root Causes

Pointing to the steep decline in crude prices and government oil revenues, Hosseini said the dwindling oil receipts have severely limited the government’s access to cash for development and other projects. “The government is not able to spend enough on helping the different sectors due to ultralow crude prices and this is one of the factors contributing to the lingering recession.”

Cumbersome laws, rules and regulations are hurdles to domestic businesses and the struggle to generate jobs, he complained. The heap of unwanted, unhelpful, unfriendly and unnecessary rules has made starting a new business “time-consuming and complicated “and costly, the experts said.  

Hosseini called for the much-awaited “business-friendly climate” the government promised on more occasions than one and said all factors inhibiting normal business must be eliminated.  “Creating the conditions and prioritizing support for those who want to start a business venture is the first step to exit recession.”

The banking sector’s woes is another factor behind the economic recession, he noted. “Reforming the banking industry has long been discussed and promised by successive governments but there has been no concrete action so far.”

The former CBI official mentioned the issue of high interest rates as another stumbling block in the way of easing the painful recession. He said high rates discourage people from starting a new business and discourage companies from investing in projects who instead prefer to park their money in banks and get returns unheard of in any other country.

Hosseini took stock of the implementation of the nuclear accord between Iran and the six world powers last month and said, “It is rather unreasonable to expect the lifting of sanctions to be the panacea for the woes of our economy including the recession.” He called for a pathology of the roots of the evils visiting the domestic economy and the need for workable and workable solutions.

“It is not fair to blame the sanctions for all our economic ills. Recession, to a great extent, is the product of structural problems our economy has long been saddled with. We need to reform the structures and change our economic thinking,” he said.

The former deputy minister of economy singled out unemployment as the country’s most urgent and important economic priority. “Creating jobs would help address many of our social problems.”