Iran’s economy is in crisis as the rial plummets to historic lows against the dollar, with inflation expected to rise above 40% without a swift agreement with the US. The rial has depreciated significantly since 2018, leading to critical increases in the cost of living. Geopolitical factors also contribute to the instability, as allies suffer setbacks and the incoming US administration signals an intention to escalate pressure on Iran.
As the Iranian economy grapples with severe challenges, the rial reached an unprecedented low against the US dollar, prompting warnings of potentially soaring inflation rates. Macroeconomist Morteza Afqah cautioned that without a swift agreement with the United States, inflation may exceed 40% prior to the onset of the Iranian New Year in March. He highlighted the likelihood of reinstating the ‘maximum pressure’ policy without an agreement, indicating deepening economic woes for Iran.
Since the imposition of sanctions in 2018 under former President Donald Trump, the rial has depreciated dramatically, losing nearly 20 times its value. Since September 2023, the currency has further diminished by an additional 30%. Current inflation rates remain ambiguous, but official figures suggest they have lingered around 40% since 2019, with essential commodities experiencing even steeper price increases. On Wednesday, the rial was trading at approximately 800,000 to the US dollar and over one million against the British pound.
In light of the ongoing crisis, Mohammad Mohammadi Golpaygani, a senior cleric in Supreme Leader Ali Khamenei’s administration, acknowledged the abnormal situation induced by prolonged sanctions and challenges in oil exports. He asserted that these circumstances present unique challenges, exacerbating economic difficulties.
Afqah underscored his bleak outlook for the national economy, stating, “The short- and even medium-term outlook for our country’s economy is not promising. There isn’t much hopeful news or any so-called good news to cling to.” He attributed rising costs and declining growth to the interconnected nature of economic factors shaping current realities. Additionally, the geopolitical landscape poses significant pressures, with non-state allies Hamas and Hezbollah facing setbacks and the fall of President Bashar al-Assad in Syria highlighting vulnerabilities in Iran’s foreign policy investments.
The anticipated stance of the incoming Trump administration suggests an inclination to intensify pressure on Tehran, not only concerning its nuclear ambitions but also regarding its influence in the Middle East, amplifying the challenges Iran faces in the context of its economic crisis.
The economic situation in Iran has been deteriorating over recent years, particularly since 2018 when the United States reimposed sanctions designed to limit Iran’s nuclear ambitions and reduce its regional influence. The sanctions have disproportionately affected Iran’s ability to manage its economy, leading to rampant inflation, currency devaluation, and widespread economic hardship. Macroeconomic indicators suggest that without an agreement to alleviate sanctions, Iran may be on a path toward continued economic instability and potential civil unrest, especially as essential goods become increasingly unaffordable for the populace.
In conclusion, Iran is currently facing a multifaceted crisis characterized by a depreciating currency and soaring inflation rates, exacerbated by international sanctions and geopolitical pressures. Without prompt negotiations with the United States, economic experts predict further deterioration, with inflation rates possibly surpassing 40% in the near future. The implications of these economic conditions underscore the urgency for a reassessment of Iran’s economic policies and international relations to mitigate ongoing crises.
Original Source: www.iranintl.com
