(Persia Digest) – An Iranian professor of economics believes: “During the next Iranian calendar year (1398 HS), there will be severe price hikes on the forex and goods markets; considering the highly possible intervention of security and government forces in potential social and economic unrests, security will be intensified.”
Dr Mohammad-Gholi Yousefi, professor of economics at Allameh Tabatabaei University in Tehran, told Persia Digest (PD): “It is not possible to have a quantitative estimation of Iran’s inflation rate, unemployment or economic growth. In fact, no economist in the world can have a quantitative estimation and any comments to this end is made either by those who know nothing about economics or are only presenting a series of imaginary figures.”
“However,” he added: “Present circumstances in Iran are not indicative of a good situation. Rising inflation, unemployment, a critical drop of people’s purchasing power, reduced hope for the future among the youth, a vast majority of workers falling below the poverty line and the lack of any positive perspective for foreign investment or transfer of technology inside the country indicate a bleak landscape for Iran’s economy.”
Yousefi added: “Vast interventions by the government to cap unrests have transformed economic and social problems into security problems and this is set to worsen. Therefore, we are to witness massive public discontent in the future and possible intervention by security and government forces. Moreover, on the international level, Iran has failed to open L/Cs, sanctions are still enforced, it is difficult to transfer money inside the country and the government is facing a budget deficit. Consequently, there is no positive estimation about Iran’s cooperation with developed Western countries. Moreover, Europe has also failed to take an effective step regarding the Joint Comprehensive Plan of Action (JCPOA).
As for assessing the inflation rate for the next Iranian calendar year, the economist said: “The economic variables affecting inflation and economic growth rates are political and vague all over the world. An inflation rate which is calculated based on the average price of 400 different goods will only be meaningful for statesmen and international monetary organizations, but the private sector will only rely on an analysis of incomes and expenses for its activities.
Furthermore, people are only concerned with relative prices and it means that instead of looking at the averages, they only pay attention to how the price of a product has changed compared to another product. However, if it is necessary to give a specific figure, I believe that Professor Hanke has given an appropriate index to assess inflation.”
He added: “Professor Hanke evaluates the inflation rate by examining foreign exchange rates in a single period of time. According to his method, the forex rate in Iran was about 3,500 tomans at the beginning of the current year (1397 HS), but increaed to 13,000 or 14,000 tomans at the end of the same year which shows a growth of 400 percent. Now if we consider 200 percent of this figure as inflation expectations or statistical mistakes, then what will remain is a 150-200 percent growth in prices for one year. But no statesman announces such a high inflation rate because they have to increase salaries accordingly.”
Yousefi added: “In 1398, Iran will experience a critical rise in its forex and goods prices. Therefore, it is possible that people face many shortages should the statesmen continue their present policies.”
The economic analyst also commented on the issue of unemployment in the approaching New Year by saying: “Based on a study I have conducted on productive industries, I found that about half of the workforce in these industries are no help to production and it means that 50 percent of the present workforce are extra. Based on economic definitions, this is called hidden unemployment. Therefore, in the New Year, not only will industries not create new employment, but with the arrival of a large number of young graduates, unemployment will rise even further.”
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