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Economists warn of crisis
Iran economists warned Monday that renewed conflict with the United States risks pushing Iran’s long-festering economic problems into a more dangerous phase, with inflation becoming increasingly difficult to contain.
The warnings came at a two-day economic conference in Tehran that brought together senior economists, policymakers and business leaders after being postponed three times because of regional instability and wartime conditions.
Former presidential adviser Masoud Nili said Iran’s economy was moving from a chronic but manageable malaise into an active crisis, and he warned inflation had entered a "more slippery phase" in which subsidies and social safety nets were no longer sufficient to protect household welfare.
Economic daily Donya-ye-Eghtesad listed chronic inflation, weak and unstable growth, persistent budget deficits, foreign-exchange volatility, dual exchange rates, pension-fund insolvency, foreign-policy pressures and rising geopolitical risks among the country’s most urgent challenges.
Former Central Bank Governor Hossein Abdoh Tabrizi argued that banking reform was essential, saying financial institutions must become "efficient allocators of capital rather than money-printing engines."
Tehran households feel strain
In Tehran, Leyla, a pensioner in western Tehran, said each trip to the supermarket brings an unpleasant surprise as just a tub of ice cream and yoghurt cost her about 10 million rials.
Leyla said that on Tuesday she received 180 million rials ($94) as her monthly pension, after a 40 percent increase from the government this year, but that it “doesn’t even begin to cover the essentials.”
Masoud said his landlord agreed after negotiation to settle for a rent increase of just less than 50 percent this year, and he told Al Jazeera that he expected next year to be much worse.
Al Jazeera reported that the government has decreed that landlords in Tehran can legally only increase rent by 27 percent, with the cap for other provinces set at 25 percent, while inflation last month was at nearly 90 percent with food inflation hitting 134 percent compared with a year earlier.
The report said Iran’s national currency hit a new all-time low this week and continued to hover around that on Tuesday at more than 1.9 million rials against the US dollar, as the ongoing conflict with the US showed no signs of abating.
War pressures markets and policy
As the conflict continues to heat up, Fortune reported that the U.S. continued to strike Iran over the weekend, with President Trump saying the action was “in honor” of three American soldiers who were killed in recent days.
Fortune said gas prices hit $4 this morning, from just shy of the benchmark yesterday, and it cited UBS’s top economist Paul Donovan warning that “economic gravity” will catch up with families at some point.
Donovan wrote that “while oil costs are rapidly being passed to consumers,” the response is to cut monthly savings rather than non-oil consumption, but he warned it “cannot be sustained indefinitely if oil prices remain elevated.”
Al Jazeera described how Iranians are dealing with compounding damage inflicted by a war launched by the United States and Israel in February, just months after a 12-day conflict with Israel, and it said people face a mounting list of challenges including electricity cuts and banking disruptions.
The Al Jazeera report also said the Islamic Republic cut off all access to the global internet during both the protest killings in January and the current war, with the second shutdown lasting three months to become the longest-ever recorded in any country.
