In economic literature, resilience is commonly defined as an economy’s ability to withstand shocks, continue functioning and avoid collapse. One of the biggest mistakes in economic analysis, however, is to assume that the resilience of an economy is the same as the resilience of households. While the two are closely related, they do not necessarily move in the same direction.
An economy may continue operating at the macro level, government revenues may remain intact, oil exports may continue and state institutions may function normally. At the same time, households can be weakened by inflation, declining purchasing power and economic uncertainty. The economy may resemble a large vehicle that keeps moving, while households are the passengers who feel every bump and shock along the journey. The engine may still be running, but that does not mean the passengers are comfortable or secure.
Recent developments in Iran illustrate this distinction. According to data from the Statistical Center of Iran, average annual economic growth at market prices stood at 3.8% between 1400 and 1403 (March 2021-March 2025). During the same period, average annual growth in government final consumption expenditure reached 2.3%, while private final consumption expenditure contracted by an average of 0.2% per year.
The contrast between macroeconomic resilience and household conditions has become increasingly visible. A recent report by The Wall Street Journal highlighted sharp increases in the prices of basic goods such as rice, meat, bread and cheese. At the same time, researchers at Capital Economics estimate that Iran’s accessible foreign exchange reserves remain sufficient to cover roughly three months of imports, similar to prewar levels. Meanwhile, Labor Ministry Deputy Minister Gholamhossein Mohammadi has stated that one million jobs were lost as a result of the recent US-Israeli war against Iran.
These developments come after more than seven consecutive years of inflation above 30%, an unprecedented period of chronic inflation in modern Iranian history. Under such conditions, the broader economy may still display elements of resilience, but the resilience of households has become increasingly fragile.
Household resilience means that families can maintain minimum living standards during periods of crisis, meet essential expenses and avoid a severe deterioration in welfare. Yet years of inflation, currency depreciation and economic instability have steadily weakened this capacity. Even many households that once belonged to the middle class have become more vulnerable to poverty. Reports indicate that the poverty rate exceeded 40% in 1404 (March 2025-March 2026).
The divergence between economic performance and household consumption is particularly revealing. Economic growth averaged 3.8% between 2021/22 and 2024/25, indicating that productive activity continued during those years. However, this performance does not guarantee similar outcomes in the current year, particularly after recent economic disruptions. More importantly, shrinking private consumption indicates that the benefits of past growth failed to reach many households. The fact that government consumption expanded while private consumption declined shows that the state retained spending capacity while families experienced a loss of purchasing power and welfare.
Important Implications
This distinction carries important policy implications. Economic success is often measured by indicators such as exchange-rate stability, continued oil exports or fiscal performance. While these indicators matter, they do not necessarily reflect the lived experience of households. Social stability ultimately depends on whether families can maintain acceptable living standards and preserve confidence in the future.
Rebuilding household resilience requires several steps. The first is controlling inflation through lower budget deficits, slower money supply growth and more stable expectations. The second is achieving more inclusive economic growth that benefits a broader share of society. The third is implementing targeted social support policies that protect vulnerable groups without being quickly eroded by inflation.
The broader foundation for these goals is economic liberalization alongside lower foreign-policy risks. In recent years, sanctions, conflict, political uncertainty and international restrictions have discouraged investment, weakened long-term planning and increased economic volatility. As long as these risks remain elevated, durable inflation control and inclusive growth will remain difficult to achieve.
Ultimately, the true test of resilience is not simply whether the economy keeps functioning, but whether households can plan for the future, meet basic needs and avoid becoming progressively poorer. Without stronger household resilience, macroeconomic stability may become increasingly difficult to sustain over the long term.
