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New Year’s Woes: Five Worrying Trends for Iranian Households

March 21 marks the turn of the Persian calendar. Iranians welcome the Persian New Year as people worldwide celebrate the start of the Gregorian calendar: with get-togethers and festivities. This year, however, Iranian households do not have much to celebrate. In recent years, Western sanctions, the COVID-19 pandemic shock, and chronic inflation have left a flagging economy, which has placed severe strain on ordinary Iranians.

To protect low-income families, President Ebrahim Raisi’s administration has embraced various policies like paying monthly cash hand-outs and issuing electronic vouchers for basic commodities. Experts remain divided about the real impact of these policies, but one thing is true; the Iranian economy has thus far managed to beat the worst expectations of widespread collapse.

International interest in restoring the 2015 Joint Comprehensive Plan of Action (JCPOA) has waned significantly over the past two years. Instead, the Raisi administration has prioritized its “Look to the East” policy, which advocates for partnerships with U.S. rivals—namely Russia and China. “Look to the East” also calls for realizing “economic resilience” against factors that threaten to derail the Iranian economy. Through direct payments and favorable subsidies, the Raisi administration has sought to convince Iranians that the Islamic Republic has fared better during the current president’s tenure than under his moderate predecessor Hassan Rouhani, who signed the JCPOA in exchange for sanctions relief.

Nonetheless, the Iranian economy faces unprecedented challenges. Here are five causes for concern among Iranian families—trends expected to cause significant distress in the new calendar year.

Runaway Inflation

The Iranian economy has experienced rapid price hikes over the past six years after U.S. President Donald Trump withdrew from the JCPOA and reinstated stringent sanctions against the Islamic Republic. Growing inflation has always been a major cause of concern for Iranian households, particularly the lowest-income households whose wages are often outpaced by consumer price hikes. According to the Statistics Center of Iran (SCI), foodstuffs have seen their prices grow up to 250 percent between March 2021 and March 2024. The SCI’s household budget report indicates that the lowest-income deciles have slashed their meat consumption in search of alternatives.

Indeed, Iran’s most needy have adjusted their purchasing behavior, seeking those food items whose prices the Raisi administration has artificially suppressed through subsidies. The housing sector has not been spared the pain of inflation; SCI reports an average two-fold jump in housing prices for the last three years. Housing prices in big cities like Tehran have skyrocketed, alienating Iranian youth who once had hopes of affording personal housing. Meanwhile, mortgage loans may hardly cover 10 percent of housing costs. As the latest data released by Iran’s Central Bank show, an apartment in the capital costs an average of IRR 740 million (about $1,233) per square meter, while the minimum labor salary remains at only IRR 100 million ($166). Only the most well-off Iranians can afford proper housing in the country’s largest city.

Tax and Spend

Iranian households are also concerned with ever-greater tax hikes amid stagnant revenues. The bite of sanctions and lower income from oil exports have placed an immense strain on the Islamic Republic’s finances. In an attempt to wean itself off petrodollars, make up for revenue shortfalls, and plug the gaping budget deficit, the government has resorted to levying heavier taxes on the population. The budget bill drafted for the next calendar year requires a 50 percent increase in taxes to fund the government. Tehran also intends to overturn a tax exemption granted to many businesses—a decision sure to pose serious risks to small businesses. The value-added tax (VAT) rate will climb to 10 percent, up one point. In parallel with higher taxation, the Central Bank’s new restrictions seeking to contain money supply growth, has  made it more difficult for Iranian businesses to access bank loans in a financial system in which banks dominate domestic investment.

Independent pundits have long warned the Central Bank about the likelihood of inflationary shocks brought about by the government’s runaway spending. However, the Raisi administration has highlighted statistics that suggest solid economic growth, presenting them as a great achievement in a bid to strengthen the public’s confidence in the national economy. Ehsan Khandouzi, the minister of economy and finance, recently claimed that the Islamic Republic had achieved a 5.1 percent economic growth rate in the third quarter of the current fiscal year. In its latest report, the World Bank estimated Iran’s economic growth at 4.2 percent in 2023, a rate that would decline to 3.7 percent in 2024. On the other hand, the government must wrangle devastating inflation, which it hopes to drive to 20 percent from the current rate of 35.8 percent.

Unemployment and Emigration

The reimposition of international sanctions in 2018 and the COVID-19 pandemic have devastated Iranian small and medium-sized enterprises (SMEs). SMEs account for the majority of employers in Iran. The World Bank has estimated that the Iranian economy lost one million jobs since the outbreak of the pandemic in 2019. Women bore the brunt of the country’s economic woes, accounting for two-thirds of job losses. The SCI report shows that women’s pre-COVID employment share stood at 14.5 percent, which fell to 12.4 percent in late 2023.

Meanwhile, the central government continues to claim that the jobless rate has fallen in recent years, even speaking of an “unprecedented” drop in unemployment. Nonetheless, the state-promoted data has failed to dissuade many Iranians, particularly educated ones, from emigrating. Between 2020 and 2021, the number of Iranians looking to migrate to other countries grew 141 percent—the fastest rate of migration to wealthy nations across the globe. A report released by the Iranian Migration Observatory highlighted growing requests by Iranians for asylum, education, or job outside the country in recent years, noting that Iran had entered the phase of “unbridled collective migration.” Amid such an imbroglio, government officials have sought in vain to restrict migration by enticement or threats—even going as far as police action.

Economic Fluctuations

The fourth factor spreading concern among Iranian households is not unique to Iran. Rising regional geopolitical tensions, led by the October 7 attack against Israel, have had a major impact on the economic outlook for most Gulf states.

The Islamic Republic, faced with internal discontent and economic woes, has tried its best to ward off any direct confrontation with the West and Israel. It must be noted, however, that regional tensions—the continuation of which the Islamic Republic has made a mainstay of its foreign policy—have directly contributed to the depreciation of the Iranian rial and, as a result, the declining purchasing power of Iranian households. Over the past year, the Raisi government managed to stabilize the official forex rate, though higher demand and regional instability in the final months of 2023 led the dollar to reclaim ground in the unofficial market. As a result, the value of the Iranian rial has slid at least 15 percent. The better Tehran can manage regional tensions and reach a modus operandi with the West and its neighbors, the more stable the forex market will become and the faster the economic situation of ordinary Iranians will improve. A clear case in point was the relative stability in the forex market after the China-brokered reconciliation deal between Iran and Saudi Arabia in March 2023.

Tehran’s diplomatic breakthroughs in normalizing ties with Saudi Arabia and Arab governments as well as joining international alliances like BRICS (comprising Brazil, Russia, India, China, and South Africa before Iran, Egypt, Ethiopia, and the United Arab Emirates were invited to join) also upgraded Iran’s regional standing and pushed the country out of a long period of isolation, which could lead to future economic windfalls even if they have had little impact on the Iranian economy to date. Embracing new partnerships may enable Iran to better circumvent U.S. sanctions. As long as sanctions remain in place, however, America’s position as the leading financial power allows Washington to choke off any major foreign investment in Iran.

Trump’s Return

The forthcoming presidential election in the United States will also have a massive impact on U.S.-Iran relations and the well-being of ordinary Iranians. Of course, Iranians hold a bitter memory of Donald Trump’s term in office. It was he who unilaterally scuppered the JCPOA, which inflicted a heavy shock on the Iranian economy. The withdrawal of the United States frightened many foreign companies who were previously willing to invest in Iran. Washington also heaped pressure on the buyers of Iranian oil—the lifeblood of the country’s economy.

President Joe Biden’s 2020 election win against Trump created some breathing space for Iran. The new president revived the hopes of millions of Iranians that the JCPOA could be restored and their livelihood would improve. Some experts believe that Trump’s comeback could stoke inflation. Iran’s crude oil exports have reached 1.3 million bpd, far from the average of 300,000 bpd recorded under Trump.

Though Biden did nothing to relieve sanctions against Iran, negotiations were relaunched for the U.S. to return to the JCPOA. With Trump the presumptive Republican nominee for president, it is very possible he returns to the Oval Office in 2025. Trump’s comeback would likely shatter any hope for a deal with Tehran for good and adversely impact Iran’s economy.

Even if Biden were to win reelection in November, Iranian households would undeniably face numerous challenges. As in recent years, Iranian household spending has been under significant strain. Absent major and tangible shifts in foreign policy, ordinary Iranians will continue to bear the brunt of the Iran-US animosity. Moreover, with hardliners and staunch critics of the JCPOA dominating Iran’s parliament, the prospects of such a marked shift are even more unlikely. Iran’s lumbering economy will likely muddle through under foreign pressure in the new calendar year. However, the present circumstances in Iran indicate a society sinking deeper and deeper into poverty each day. Regardless of the official data and narratives, ordinary Iranians are condemned to an existence marked by economic instability, dilemma, coercion, fear, and concerns over the possible comeback of an unpredictable president in the United States. To provide the modest, stable life that so many Iranians desire, the Iranian government must relieve the pressure of sanctions and realize better relations with the West.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Issue: Economy & Innovation, Politics & Governance
Country: Iran

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Mohammad Hashemi is a journalist, researcher and media consultant based in Tehran. Formerly he was the chief editor and producer at PressTV website, the Iranian state-owned English news, and documentary network (2015-2019). He was also a political editor at the Financial Tribune (2014-2015) and the Tehran Times (2010-2014). Hashemi is an alumnus of the ‘Heinz- Kühn Foundation’ in North Rhine-Westphalia in Germany. His work and commentary have been featured in Al Jazeera, Inside Arabia, the Middle East Eye, The Wire as well as Iranian media outlets, among others. Majid Heydari is an economist and data analyst specializing in Iran’s economy. He is a graduate in the field of economics from the Institute for Management and Planning Studies affiliated with the office of the President of Iran. Currently, he is the Editor of the macroeconomic desk at Donya-e-Eqtesad Daily, Iran’s most prominent and popular newspaper in the area of economics. Over the past decade, he has authored dozens of insightful articles and analyses in the above field and contributed to research and executive institutes in Iran.


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