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Stagflation Becomes Alarming
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When the West is trying to increase international sanctions against
Iran, some factors causing the current situation cannot be controlled
through domestic policies.
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Iranian economy has been
grappling with complicated conditions since months ago. Most private sector
activists and representatives of chambers of commerce have issued their
warnings about these conditions. Private plants and factories are using a
small proportion of their operational capacity and many of them are on the
verge of bankruptcy. Most of them are making loss. Under these conditions,
many production units which are not willing to lay off their workers hope that
the government support would help them to survive. Two economic variables,
that is, stagnation and inflation, which have been rarely seen together in the
past 30 years, are now working in tandem.
It is not surprising,
therefore, that under such circumstances, Iran’s economic situation has become
so chaotic that bounced checks account for 10.7 percent of total checks; a
ratio which has had no precedence in the past 30 years.
Although during the war with
Iraq (1980-88), inflation was very high, but economic growth was suitable due
to economic prosperity.
At present, stagnation and
inflation are working hand in hand. In addition, such dangerous factors as
sanctions, reduced bank reserves, international stagnation, decreased exports,
recession in domestic market, and political turmoil following the recent
presidential election, have worked to speed up capital flight and make
conditions more difficult for producers.
Is there any way out of the
current situation? It is very difficult to answer this question. When the
global economic crisis made its appearance in the United States, economists
studied its root causes and possible ways out. As a result of compensatory
policies including expansionary policies adopted by governments, they have
been able to weather the crisis and it is said that international crisis will
be over by 2010.
In our country, however, the
situation is more complicated and stagnation has more complex causes.
Therefore, it is not likely to find a solution in the near future. Problems
arising from government’s control of economic policies are still in place.
When the West is trying to increase international sanctions against Iran, some
factors causing the current situation cannot be controlled through domestic
policies. Distrust is also rife in all economic areas, especially in the
private sector. There is no hope for a short-term cure and even early signs of
economic recuperation are not on the horizon. Although the 10th government has
been in office only for two months, there does not seem to be any substantial
difference in the president’s viewpoints compared to his past term, nor
viewpoints of ministers and other high-ranking executive officials. |
