Tyranny of numbers

More of the same (austerity) in Iran’s new budget for 2016/17

Posted in General, Macroeconomy by Djavad on January 23, 2016

For the third year in a row the government has proposed a tight budget, keeping spending constant in real terms.  I am not sure the macroeconomics I studied decades ago has much relevance to Iran’s current economy, but the Keynesian in me says, given the economy’s dire conditions, a bit of fiscal stimulation could not hurt.  The government still believes that inflation rather than bankruptcies and unemployment as the enemy number one.  But perhaps Rouhani’s economic team is banking on the lifting of sanctions to pull Iran out of recession and generate a modest 5% growth.  This seems to be also what the IMF expects.
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Understanding the rial’s strength

Posted in General, Inflation, Macroeconomy, Sanctions by Djavad on January 18, 2016

Last month a headline (link in Persian) in Eghtesad News read: “Do not buy dollars, it will get cheaper”!  More surprising than the headline was who said it: Iran’s Central Bank Governor, Valliollah Seif.  As his critics were quick to point out, it was unwise for the one official whose economic predictions should be muted and very general — the US Fed’s statements about the future need expert decoding — to claim to know which way the exchange rate will move in the future (you can read here — in Persian — the CBI’s lengthy explanation for the controversial remarks). (more…)

Is the Tehran Stock Exchange a good barometer of Iran’s economy?

Posted in Employment, General, Macroeconomy by Djavad on October 10, 2015

The Tehran Stock Exchange (TSE) has been in the news lately, not because its 22-month downward slide has ended but because four cabinet members highlighted its plight in a letter to President Rouhani.  The letter was written on September 9 but came to light last week.  The brouhaha that followed, however, was not about the TSE and what its poor performance means for the economy, which appears to be heading for a double-dip recession.  Attention has instead focused on division within Rouhani’s coalition government and what it means for the future of his austerity program.  I wrote about these issues for Al Monitor last week; here I’d like to take a closer look at the performance of the TSE — how badly it has done, and why. (more…)

Getting the facts right on Iran’s economic growth

Posted in General, Inflation, Macroeconomy by Djavad on July 31, 2015

A post on Iran’s GDP may seem very wonkish, but it is actually very relevant to two important political debates. One is the current debate in the US about Iran’s economic prospects and the other is the never ending debate in Iran about the economic cost of the Islamic Revolution of 1979.  Neither seem to be well informed with the facts. (more…)

Ahmadinejad’s oil windfall: how large was it really?

Posted in General, Macroeconomy by Djavad on May 24, 2015

You have probably read or heard very knowledgeable people talk about the $800 billion of oil revenues earned by the Ahmadinejad administration (for example, Iran’s Economy minister quoted in the Guardian here and Robin Wright speaking on NPR’s Diane Rehm show here), and that this is more than all the revenues earned from oil in the preceding 100 years.  Well, don’t believe them!  Repeating things frequently makes them sound more true but does not make them so.  Yes, the oil windfall of 2005-2012 was larger than all the revenues earned in the preceding century, but this is not true in terms of real dollars and therefore not really true. (more…)

Iran’s proposed budget for 2015/2016: tight fiscal policy to continue

Posted in General, Macroeconomy by Djavad on December 14, 2014

Rouhani’s budget for the current year (1393 =2014/2015) was a tight one, and for good reason because he inherited a macroeconomy in a shambles with a high rate of inflation.  Despite the contractionary budget, this year the economy appears to be squeezing a small positive growth rate (4.6% in the first quarter).  If Rouhani’s promise of a robust economic recovery is to turn from hope into reality, the just released Budget Bill for 1394 (2015/2016) has few indications. (more…)

The global sources of Iran’s inflation

Posted in General, Inflation, Macroeconomy by Djavad on November 9, 2014

The recent welcome slowdown of inflation in Iran, like its devastating acceleration four years ago, has something to do with global influences that are well beyond Iran’s control.  The credit in the current slowdown in inflation goes in large part to Rouhani’s economic team but what Iran’s economy minister, Mr. Tayyebnia, has called a “miracle”, has earthly reasons that are not even under the control of Iranian policy makers. Not realizing these influences can be misleading.    (more…)

New GDP data in Iran: is recovery underway?

Posted in General, Macroeconomy by Djavad on October 10, 2014

In its recent quarterly Economic Trends, the Central Bank of Iran reported that the economy grew by 4.6% last spring (which corresponds to the first quarter of the Iranian year 1393 and the second quarter of 2014).  What appears to be straightforward reporting of macroeconomic facts has caused much controversy in the Iranian media.  Controversy is part and parcel of economic data in Iran, so nothing is new there, but in this case the facts themselves are not as straightforward as one might think.  Mr. Rouhani and his economic team insist that the numbers are a firm sign that the recession has ended, while the opposition dismisses the news as bogus.

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Recording a lackluster economic performance in Iran

Posted in General, Macroeconomy, Sanctions by Djavad on August 4, 2014

Today is the first anniversary of President Rouhani in office, so I wrote a piece for Lobelog.com reviewing the economy’s performance.  I noted his accomplishments –lower inflation, stopping or slowing down economic free fall and above all lifting business spirits —  and setback — continued loss of jobs in industry right up to this summer.  The fact that I am able to claim the latter is because of another accomplishment of his government, which I did not note in that piece — timely release of economic data.

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What do job numbers say about economic recovery in Iran?

Posted in Employment, General, Macroeconomy, Unemployment by Djavad on July 24, 2014

The most recent labor force survey (LFS) results for spring, 2014, that Iran’s Statistical Center released last week must be disappointing for Rouhani’s economics team.  This survey, which  is collected quarterly and is put out with remarkable speed, is the only official data that give us a sense of how the economy has been doing most recently.  The short report shows job gains in agriculture (by 25%), which may be mostly seasonal, and services (by 2%), while industry lost jobs (by 1.3%).  The fewer number of jobs in industry is disappointing because the main benefits of the agreement between Iran and the 5+1 signed last November were expected to come in industry.  The employment picture that LFS paints for industry is not very complimentary for Rouhani’s first year in office.  Industrial employment, according to LFS, has been declining since he took office a year ago.  Last summer, more than 7.5 million workers were employed in industry, 9 months later fewer than 7 million are working there.   Agriculture and services have also lost since then, though by less, for a total of one million jobs lost since he took office.

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