More of the same (austerity) in Iran’s new budget for 2016/17
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 are the economy’s 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
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…)
Khodadad Farmanfarmaian: a personal remembrance
Khodadad Farmanfarmaian, the chief architect of Iran’s economic miracle in the 1960s, passed away in London on December 16, 2015 at the age of 87. He was one of the Shah’s few good men, and helped launch Iran’s “decade of economic miracle” in the 1960s, before 9% annual growth rates became commonplace in Asia. He held key positions before the revolution as the Governor of the Central Bank and the head of the Plan Organization. In 1973, he broke from the Shah, whom he described as having “no real understanding of economic development,” over the ill-advised and ill-fated upward revision of the Fifth Plan in 1974. (more…)
Is the Tehran Stock Exchange a good barometer of Iran’s economy?
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…)
Will Rouhani complete the reform of subsidies?
In principle, the answer to this question should be yes. Rouhani’s administration professes to be pro-market and is eager to shift resources from wasteful consumption to economic growth. What better way to remove energy subsidies and use the proceeds to fund the cash-starved development budget? (more…)
Getting the facts right on Iran’s economic growth
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…)
Reporting of economic data in Iran: an old rivalry resurfaces
It is a good sign that people in Iran are paying increasing attention to the accuracy of government data. Before this they used to dismiss all data, especially inflation, as propaganda (see my previous posts on inflation here and here). The fact that an announcement about which government agency is authorized to release economic statistics became news last week is a sign that more people take such data seriously, as they should.
Ahmadinejad’s oil windfall: how large was it really?
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 economy after the Lausanne accord
This week I published this oped in the UAE newspaper, The National. Referring to Rouhani’s famous refrain that as the centrifuges turn so should the wheels of the economy, I asked if “he can take much of the turning to production lines rather than shopping malls.” I would like to expand on that question here. (more…)
More on Iran’s proposed budget for 2015/2016: a peak into Rouhani’s priorities
This is a short followup note to my previous post which compared the proposed budget for next year with the budget bill for the current one. I was looking for a table that included the numbers for basic expenditure items that would reveal the budget priorities for next year and could not find one in English, so I decided to post one here. Then I found an excuse to grumble about lack of attention to long term development priorities, such as education, which have been eclipsed by all the talk about inflation as enemy number one and the poor climate for business as the enemy number two. (more…)
Tyranny of numbers 
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