Iran’s economy has been on a death road for years due to widespread government interference. An economy that due to the regime’s corruption has all but collapsed, and now after 43 years all indicators are showing a terrible picture, and stagflation is just one of its results.
Low GDP growth is one of the major negative features of this economy. Data from the Statistics Center of Iran show that over the past 20 years, the country’s GDP growth has averaged negative, zero, or, at best, just one percent.
In addition, reports from this center say that over the past 20 years, Iran’s average inflation rate has been 20 percent. Negative economic growth and at the same time double-digit inflation, a catastrophe called stagflation.
Many economists believe that only sick and bankrupt economies are experiencing stagflation. Normally, a normal economy either suffers from inflation or is in recession. However, the simultaneous emergence of two phenomena, double-digit inflation, which means rapid price growth, and the phenomenon of recession, which indicates negative or zero economic growth, show that policymakers do not have the necessary competence and authority to run the country.
Stagflation devours the bases of production like termites and directs large amounts of liquidity to intermediation, experts say. In Iran, since 2018, when sanctions coincided with mismanagement and government corruption, and the rate of each dollar increased from 5,000 to 19,000 tomans and later to 33,000 tomans, the stagflation deepened, and in less than a year, at least $30 billion in foreign exchange from the production sector entered brokerage and intermediation activities.
The survival of any economy depends on the positive and continuous performance of the production, services, and agriculture sectors. The circulation of liquidity in these three sectors and the positive trade balance are also factors that are essential for the growing trend of any economy; However, all these sectors in Iran have become dysfunctional due to the expansion of unproductive activities, brokerage, and stagflation, and have not had a normal trend in recent years.
For example, Iran’s foreign trade balance was negative and between $3 billion to $10 billion in a year on average, and the three main sectors of the economy together have experienced negative economic growth.
The inefficient and disproportionate policies of the Iranian government to the current situation have increased the risk of investing in the manufacturing and services sectors to such an extent that many economic actors prefer to shift their liquidity from productive activities to intermediation.
Trading currency, gold, housing, and cars are among these unproductive activities that not only add nothing to the country’s economy but also fuel inflation.
However, the main root of Iran’s economic problems must be sought in the nature of Iran’s reactionary government. The government’s approach to internal and external issues is such that it reproduces problems. For example, the foreign policy of this government, headed by Supreme Leader Ali Khamenei, has imposed crippling sanctions on Iran, and at least $10 billion in the capital is leaving the country each year due to instability in macroeconomic indicators.
By providing the right conditions for intermediation, the government has not only destroyed the country’s production but also degraded social and moral values. It is as if intermediation has become a principle in the economic culture of the regime.
Evidence that brokers are more respected, and on the other hand, no producer or craftsman is happy with the government’s response, are due to the sudden decisions of the government and the enactment of new laws, none of them can plan for the medium and short term.
This means that the lack of a clear outlook for economic actors contributes to the intensification of low economic growth and contributes to stagflation.
Under these circumstances, it can be predicted that the country’s GDP will continue to be negative or at best zero. Of course, the statistics manufacturing of the regime’s Statistics Center must be ignored.
Because according to this center, Iran’s economy is working well, while Iran’s real inflation rate is above 60 percent, and at least 60 million Iranians are facing a livelihood crisis.