The role of external shocks in Iran’s inflation
Last month, the consumer price index (CPI) rose at annual rate of 9.4%, down from 37.4% the months before and far lower than its peak increase of 85% last October. By itself, this is no indication that inflation is slowing. Based on past experience, inflation is likely to go back up, but it may well be a sign that inflation is on its way down, the same way it happened after the previous two bouts of high inflation in the past decade. Inflation is the most important grievance of Iranian voters as they go to the polls this week, so it is worth taking the monthly drop seriously.
(more…)Five figures show the losers and winners of economic growth under different presidents of the Islamic Republic
Iran has been under four different presidents since the end of the war with Iraq in 1988, each with its own style and philosophy. As the June presidential election nears, it is interesting to look back to the past and ask how each administration did in terms of inequality, and how the poor, the middle class and the rich fared under them.
(more…)Iran’s Covid-19 fatalities: excess deaths show serious undercounting
The question of accuracy of reported Covid-19 deaths is not news for most countries, but in the case of Iran it is because it has geopolitical significance. Iran’s foes are interested in it because the higher the number of deaths from Covid in Iran, the more likely Iranian leaders are to stop resisting US economic pressure. For others, who care more about the plight of ordinary Iranians, higher true fatalities signify a greater humanitarian cost of US sanctions. (more…)
Update on Iran’s Covid-19 epidemic
In a recent webinar at Harvard’s Middle East Initiative and a virtual conversation with Princeton’s Iran Center (here) I discussed the extent of the Covid-19 epidemic in Iran, and each time noted that, given the country’s high level of economic distress and the government’s tight budget, stay-at-home rules may not last very long. This has come to pass now. A few weeks ago the government relaxed the social distancing guidelines and, after a month of decline in the daily numbers of cases and deaths, both rates seem to be heading back up. (more…)
Making sense of Iran’s coronavirus statistics
Iran’s COVID-19 crisis has gotten lots of media attention because Iran was an early epicenter of the pandemic, and because of its geopolitical significance. The crisis has also intensified pressure on the Trump administration not to heed calls by former world leaders, former US diplomats, and influential newspaper editorials, to ease sanctions against Iran. For some proponents of regime change in Iran the epidemic is more than a human tragedy: it is also the proverbial straw that could break the camel’s back, which is why throwing some light on the intensity of the crisis is timely. (more…)
The budget for 2020/2021 has become law
The budget for the new Iranian year 1399, which started on March 20, was presented to the parliament back in November but fell victim to the devastating coronavirus crisis and the election of the new, conservative parliament. I was not inclined to invest the time to update this blog on the proposed budget because they seemed subject to radical modifications. However, the deliberations of the parliament were cut short on orders from Iran’s Supreme Leader, and a slightly modified budget was submitted to the Guardian Council, which approved it last week. So now is a good time to update my budget tables. I did not have the numbers below when I wrote this piece for ForeignAffairs.com a week ago. I could not find all the details (like the total revenue from taxes) in the final budget that the parliament sent back to the government. (more…)
More dire predictions of economic collapse in Iran from the Wall Street Journal
An angry and dystopian op-ed about Iran, published in the Wall Street Journal on March 1, committed several errors in judging Iran’s economic performance that would fail my undergraduates economic students. They are taught to never fall prey to the vagaries of exchange rate fluctuations in developing countries when making international comparisons of living standards. For example, if the value of a country’s currency drops suddenly, its GDP measured in US dollars doesn’t collapse immediately — it may even go up. Since the 1960s, millions of dollars has gone into research to make data available for international comparisons. These are widely available on the World Bank data bank site and from the Penn World Tables, where the International Comparison Project originated. I have previously written about international comparisons of living standards here and here in this blog and elsewhere. There is therefore no more excuse for picking bad data from the internet to write bad op-eds. (more…)
Rising employment since Trump’s sanctions may not last
Earlier this month the Statistical Center of Iran (SCI) released the results of the latest quarterly labor force survey, which show employment continued to expand during fall 2019 (the third quarter of the Iranian year 1398). The data question the dire accounts of Iran’s economy that have appeared in western media, a point that I raised in a recent post in Project Syndicate and again this week in ResponsibleStatecraft.org (which has replaced Lobelog.com). However, there are reasons to believe that this positive trend is short-lived, that as excess capacity is used up and new investments fail to materialize, the economy takes a turn for the worse. Below, after presenting the new data, I discuss several challenges to employment if sanctions continue. Some of these challenges can be overcome by domestic reform, such as banking reform to enable the flow of credit to producers, but others are not under the control of the government, such as moving money internationally. (more…)
Cash transfers increase after Iran protests, but do they make a difference?
The gasoline price hike of November 15 triggered widespread violent protests in Iranian cities. Three days later the government announced that it would increase the amount of cash transfers to compensate for the price increase and soften its blow. But do the new transfers adequately compensate for the gasoline price increase? My estimates below show that they more than compensate those in the bottom 40 percent of the population — generally considered to be the vulnerable part of the population — while the top 40 percent lose. Most people in the middle break even.
The poor and the gasoline price hike
Since the announcement of the gasoline price hike on Friday November 15, events in Iran have taken a tragic turn with loss of life and destruction of property. They also took a perplexing turn. Three days after the price increase and the vague promise of cash compensation for the price hike, on Monday the government announced it was putting the promised money into people’s bank accounts. If the compensation scheme was ready, why not announce it with the price increase? I am not sure if it would have prevented the unrest altogether, but at least there would have been one fewer grievance. (more…)
Tyranny of numbers 
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