Three weeks after Iran and the United States signed a memorandum of\nunderstanding to extend a ceasefire, the security situation in the\nregion remains far from stable. Continuing tensions are fuelling\nconcerns that Iran\u2019s economic recovery will be a lengthy process, even\nif a permanent peace is achieved. In the last two days, three oil\ntankers have reportedly been targeted in the Strait of Hormuz, incidents\noccurring as Tehran and Washington were scheduled to resume\nthird-party-mediated talks to end the conflict, following the funeral\nprocession of Supreme Leader Ayatollah Ali Khamenei. The conflict\nescalated on Wednesday (8\/7) when the US military launched massive\nairstrikes on several areas in southern Iran. In retaliation, the\nIslamic Revolutionary Guard Corps (IRGC) and the regular Iranian\nmilitary fired missiles and drones targeting US military interests in\nBahrain and Kuwait. Both nations accuse the other of violating the\nceasefire agreement reached last month.<\/p>\n
Although there is hope that international sanctions on Iran could one\nday be lifted if a peace deal is reached, economists believe the\ncountry\u2019s economic condition will not recover quickly. For years, Iran\nhas faced pressure from a combination of factors, including government\nmismanagement, corrupt practices, Western and UN economic sanctions, and\nthe impact of two wars in a single year against the United States and\nIsrael. The situation has been worsened by deadly nationwide\ndemonstrations last January and prolonged internet blackouts. The latest\ndata from the Statistical Centre of Iran shows the economic strain is\nintensifying. In the month of Khordad, the third month of the Persian\ncalendar ending on 21 June, the annual inflation rate reached 88.6%, an\nincrease of nearly 6% from the previous month. This figure is among the\nhighest since World War II, when Iran experienced a food crisis due to\nthe Allied occupation. The sharpest price increases were in the food\ngroup, with food inflation hitting nearly 134% year-on-year. Prices for\ncooking oil and fats soared by more than 278%, while red meat and\npoultry prices rose by over 178%. Bread and cereal product prices\nincreased by nearly 139%. These price surges continue to erode public\npurchasing power and push more citizens into poverty.<\/p>\n
In the labour sector, the official unemployment rate is recorded at\n7.5% for the current calendar year. However, the labour force\nparticipation rate is only around 40%, indicating that a large portion\nof the working-age population is not active in the formal job market.\nThis group includes students, pensioners, informal sector workers, and\nthose who have stopped seeking work. The quality of employment is also\nunder scrutiny, with more than 38% of formal workers clocking over 49\nhours per week, while youth unemployment remains above 20%. Meanwhile,\nthe minimum monthly wage is equivalent to just about 95 US dollars based\non the free market exchange rate in Tehran. The rial has continued to\nweaken, reaching around 1.75 million rials per US dollar, approaching\nits all-time low of 1.9 million rials recorded last May. Budgetary\nconstraints mean the Iranian government can only provide social\nassistance in the form of cash subsidies worth a few dollars each month,\nsupplemented by electronic vouchers for basic necessities.<\/p>\n
A Central Bank of Iran report released at the end of June indicates a\nworsening economic situation. Gross domestic product (GDP) for the\ncalendar year ending 20 March contracted by 0.7%. Gross fixed capital\nformation, a key indicator reflecting investment and production\ncapacity, plummeted by nearly 12%. Foreign trade activity also declined,\nwith the value of imports falling by 16.6% and exports decreasing by\nalmost 5%. The damage from nearly 40 days of bombing, the longest\nnationwide internet shutdown ever imposed by the Iranian government, and\na US naval blockade of major ports in southern Iran are further\ncompounding the pressure on the national economy. The International\nMonetary Fund (IMF) forecasts that Iran\u2019s economy will contract by a\nfurther 6.1% throughout 2026. However, some economists see a potential\nfor recovery if the security situation genuinely improves. Mahdi Ghodsi,\na senior economist at the Vienna Institute for International Economic\nStudies, noted that many of the recent job losses could potentially be\nreversed if the military escalation stops. \u201cIn that case, some of the\ntemporary layoffs in the services, retail, transport, construction, and\nsmall business sectors could be reversed relatively quickly, because\nthese activities are highly sensitive to uncertainty and disruption,\nrather than to the destruction of productive capacity,\u201d he told Al\nJazeera. Ghodsi added that recovery would be faster if transport routes\nreturn to normal, energy supplies stabilise, internet systems are\nrestored, and payment services can function optimally again.\nNonetheless, analysts believe that Iran\u2019s economic recovery will remain\na major challenge, with the impact of war, high inflation, weak\ninvestment, and looming sanctions expected to continue limiting the\ncountry\u2019s economic growth for years to come.<\/p>", "url": "https:\/\/jawawa.id\/newsitem\/irans-economy-faces-deepening-crisis-amid-ongoing-conflict-and-soaring-inflation-1783507841", "image": "" }, "sponsor": "Okusi Associates", "sponsor_url": "https:\/\/okusiassociates.com" }