World Bank’s Prediction of Iran’s Economy – Part 1

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World Bank's Prediction of Iran's Economy - Part 1

World Bank’s prediction of Iran’s economy

According to Iran Gate, experts and analysts at the World Bank predict that Iran’s economy will enter a new recessionary phase due to escalating sanctions, which could make living conditions for Iranians even more difficult than today.

Recently, new reports from the World Bank regarding the economic outlook of Iran have been published, raising interesting information. One of the important predictions by the World Bank is the worsening of people’s living conditions in Iran if there is no significant change in the nuclear policy.

Iran Gate has summarized a recent report by the World Bank on Iran’s outlook in a two-part document. The World Bank’s report, which covers the spring and summer of this year, is based on official statistics, international institutions’ estimates, and the economic situation in Iran. The first part of the report provides a general overview of the economy, while the second part presents extensive predictions about Iran’s future economy.

What is happening in Iran

In 1401, the Iranian economy continued its mild growth for the third consecutive year, which many believe will not be sustainable. It should be noted that Iran’s Gross Domestic Product (GDP) grew by approximately 38% in 1401, driven by growth in the services sector. However, a significant portion of this growth was due to an increase in oil exports, which was facilitated by the easing of oil sanctions by the Biden administration in the United States. This increase has led to significant changes in Iran’s economic statistics and figures.

Of course, the improvement in weather conditions and climate in 1401 greatly helped the agricultural sector. After a severe recession in previous years, this sector was able to experience some growth due to the improved weather conditions in the country.

Sustainable inflationary growth will remain.

Official statistics and observations indicate that the growth in Iran’s Gross Domestic Product (GDP) in the past solar year was driven by demand stimulation in the country. In other words, this 38% growth was a result of intensified and significant inflation over the past two years. Despite its expansionary nature, the government budget for 1400 was adjusted to some extent in line with the 40% inflation rate, resulting in a higher budget deficit in line with the inflation rate.

On the one hand, due to the increase in the country’s oil revenues, which resulted from the lax policies of the United States government, it has had a significant impact on achieving a 38% growth. This increase in income has led to an increase in exports and imports, which of course has a noticeable effect on the gross domestic product. However, considering the more severe growth on the import side, it can be said that non-productive sectors of Iran’s economy are more stagnant than productive sectors.

The shadow of sanctions on people’s livelihood

Official reports from Iran indicate the severity of the living conditions in the country. Despite the 38% growth in gross domestic product, the economic sanctions have not been able to bring about an improvement in the livelihood of Iranian citizens. These sanctions, due to the extensive restrictions on accessing global markets and cutting-edge technologies, and most importantly, attracting foreign investment, have made the situation more severe than ever before.

One of the factors indicating the lack of improvement in the living conditions of Iranians is the unemployment rate in the country. Contrary to unofficial statistics, the employment rate has not significantly improved despite economic growth. It should be noted that the average employment growth in 1401 (Solar Hijri calendar) has been affected by the loss of jobs due to drought and water shortage in the agricultural sector, as well as the closure of the coronavirus pandemic worldwide, including Iran. However, this increase has not been significant enough to make a noticeable change in the livelihood of the Iranian people. Therefore, employment in Iran is still about 700,000 jobs less than the number recorded before the coronavirus pandemic.

Another concerning factor in the Iranian economy is the very low labor force participation in the country. This component, which remains at around 40.9 percent, indicates the insufficient job opportunities in the Iranian labor market. Although the unemployment rate decreased to 9 percent in 1401, this was mainly due to a decrease in labor force participation, as the active population actively seeking employment has significantly decreased.

In general, an estimate suggests that around 300,000 jobs were created in the year 1401. This is despite the fact that over one million jobs were lost in the year 1399 due to the COVID-19 pandemic, and the government has been unable to fill the gap in the labor market even after the end of the pandemic. However, this gap has mainly affected employed women in Iran, but the economic recovery also indicates some improvements.

Men have been more successful in returning to the labor market compared to women. In the years 1399 and 1398, two-thirds of the lost jobs were related to the share of women in the labor market. However, currently, women’s share in the job recovery accounts for only one-fifth of the created jobs.

Source: World Bank


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