Off target in subsidy reform
This week the bill to target subsidies, intended mainly to reduce subsidies for energy products, left Iran’s parliament (majlis) for the Guardian Council. The Council has the last word on matters legislative, and may well decide to kill the bill because the government does not want to implement it with the modifications added by the parliament. President Ahmadinejad, known more for its populist inclinations than pro-market sentiments, has taken an unlikely position to reform Iran’s $60 billion subsidy program (more than 15% of national income) on energy, food, and a few other items. But the dispute over who should control the revenues saved from the bill’s implementation (the subsidy fund, for short) threatens to derail this historic effort to wean Iranians off cheap energy. If the bill survives the Guardian Council, it is sure to die in implementation. Raising prices for basic commodities in the highly charged post-election political atmosphere of Iran is difficult enough, an unwillingness government is not likely to forge ahead with doing so. (more…)
The 2008/09 recession in historical perspective
New survey data show precipitous drop in incomes
For the last few days I have been staring with disbelief at the results of the most recent Household expenditures and Income Survey from the Statistical Center of Iran. The drops in expenditures and incomes are much larger than I had expected. Too bad that the release of the Central Bank national accounts data have been delayed. They wold settle my questions about the recession last year because besides personal consumption, they would provide data on investment and public expenditures.
Rural incomes and expenditures rose by 2.8% and 10%, and urban by 13% and 15%. Taking into account an inflation rate of 25.4%, we aer talking about 20 and 10 declines in average incomes of rural and urban households, respectively. This level of decline did not happen in the worst years of the war with Iraq. The government was not short of cash, so why such a large drop?
I will have to get back to staring at the numbers until someone enlightens me!
Signs of the economy slowing–anyone in charge?
The recently published unemployment data for spring 2009 (1388) indicate that economic slowdown continued in the second quarter of 2009. Without the national accounts data for 1387, due any day, it is difficult to be certain about the severity of the current economic slump, but unemployment and inflation data and the continuing political crisis in Tehran are reasons to be concerned about the economy. (more…)
The three rates of inflation
A friend asked me to write something to help reduce the confusion surrounding how inflation is measured and reported–or misreported during the election. Here is a brief explanation of not how the Consumer Price Index (CPI) is measured, which is a long story, but the three ways it can be reported. (more…)
The Ahmadinejad-Karrubi debate: and the loser is …
Statistics. Between the two of them it was hard to tell who won that debate on June 6, 2009. But statistics was a certain loser. Mr. Ahmadinejad provided a series of charts to defend his economic record (which, by the way, was not under attack that night) but Mr. Karrubi dismissed them by simply saying that his numbers were wrong. Most of the numbers I was able to see on the television screen seemed right to me. But, unfortunately, numbers were not the point of the debate. (more…)
Stagnant rural incomes
The gap between rural and urban incomes has been widening because the rural areas appear to have missed the recent boom or President Ahmadinejad’s redistribution. According to survey data, in 2007, the gap between rural and urban per capita household expenditures reached its highest level, nearly 50 percent, up from 45 percent in 2004. During these three years, when urban families enjoyed (a modest) 3.5 percent annual growth, rural expenditures grew by zero percent! Why the rural economy has fallen behind or out of national favor is anybody’s guess, but here are a few leading explanations. (more…)
Living with lower oil prices
Iranians are more likely to complain about the prices of cucumber and watermelon, but if you ask economists what are the two most important prices in an economy, they would say the exchange rate and the interest rate. The exchange rate is the price that links Iran to the rest of the world, and the interest rate is the link between the present and the future. If a government can get these prices right, it has done half of its job in economic policy. (more…)
Myths about Iran’s economy
Are living standards as poor as they say?
Western journalists who travel to Iran get an earful of complaints about how bad things economic are. The World Bank disagrees. Iranian GDP per capita in 2007 stood at $10432 (in 2005 Purchasing Power Parity dollars), which is only one-forth that of the of the United States, and less than a thousand dollars below Turkey’s. In terms of average growth rate of GDP per capita, Iran has actually done better than in the ten year period 1997-2007, 3.5% compared to 2.5% for Turkey. These numbers are readily available from the World Bank’s World Development Indicators website.
There is no shortages of complaints one can have about Iran’s economy (high youth unemployment, high inflation, and stagnant productivity, to name a few) , but a low standard of living is not one of them. (more…)
Tyranny of numbers 
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