Iran01 October, 20262 min read
Iran’s Economy Contracts 10.1% as Inflation Hits 89.8% After Exchange Shock
This article is an automated aggregation of coverage from news outlets. Our editorials offer in-depth analysis curated by the NewsCord team.
Iran's economy contracted 10.1% in Q1, signaling a deep recession. Point-to-point inflation reached 89.8% by end of Shahrivar, with annual inflation 73.6%.
3 outlets told this the same way.
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Inflation and contraction
Iran’s economy is showing negative growth of 10.1 percent, with inflation remaining high as households face reduced production and higher prices. The Iran Statistical Center reported that the economy contracted by 10.1 percent in the first three months of the year, while point-to-point inflation at the end of Shahrivar (September) stood at 89.8 percent. Khabaronline said annual inflation reached 73.6 percent as the first half of the year 1405 in the Iranian calendar passed.
Macroeconomic analyst and economic critic Mohammad-Taqi Fiyazi said the rising inflation trend continued after an exchange shock and warned that a further rise in the exchange rate could intensify inflationary pressure. Fiyazi tied inflation pressure to the dollar’s rise, saying that in a 40–45 day window the price of one U.S. dollar rose from under 180,000 rials to over 256,000 rials.
Oil, trade, and sanctions
Fiyazi said decreased oil exports, reduced foreign trade, destruction of infrastructure, and lower gross capital formation made the growth outlook difficult. Khabaronline reported that exports of goods and services fell by 35.7 percent and imports by 14.8 percent, framing both as factors that would add to inflation. Fiyazi said inflationary pressure was coming from both supply and demand, and he pointed to siege and intensified sanctions as pressures that could increase the surge in prices.
Khabaronline said the exchange rate would be another cause increasing inflation even more as the situation worsened. Fiyazi emphasized that if Iran’s oil reserves on the seas run out, the situation would become harder, and he said a clear overview for the economy this year could not be drawn.
Growth details and outlook
Khabaronline said the Statistical Center reported negative growth of 10.1 percent for the first three months, describing it as a record low in recent years. Fiyazi said growth excluding oil was negative 4.6 percent and said the breakdown showed negative 26 percent for oil and gas extraction. Khabaronline reported that extraction of oil and gas fell by 26 percent, indicating that a significant portion of the state’s foreign currency earnings from this sector had declined.
Fiyazi said growth is generally more affected by external factors such as war, sanctions, internal tensions, or sieges than inflation, and he said in turbulent years growth tends to decline. Fiyazi added that if there is war, the inflation growth trend will be higher, and he expected the rising inflation trend to continue in the remaining months of 1404.