Hyperinflation Awaiting Iran’s Economy – Part 1
Hyperinflation Awaiting Iran’s Economy
According to Iran Gate, a compilation of economists, with the end of the month of Farvardin 1402 (April 2023) and the emergence of signs of the country’s economic situation, it is believed that the likelihood of hyperinflation in the current year has significantly increased.
Some Iranian economists have recently expressed concerns about the increasing likelihood of an unprecedented surge in inflation rates in the coming months, and have warned about its consequences. According to this group of economic experts and analysts, if such a scenario unfolds, we will witness hyperinflation in the country, similar to what happened in Venezuela and Zimbabwe.
But what is the likelihood of such a scenario occurring in Iran’s economy? Iran Gate has examined scenarios that could potentially lead to hyperinflation in the country in a two-part dossier. The first part discusses the subject and definition of hyperinflation, as well as mentioning global examples of this devastating economic phenomenon.
What is Hyperinflation?
In the classical definition, hyperinflation refers to the rapid and continuous increase in prices accompanied by a rapid increase in the money supply. If such a situation occurs in a country’s economy, one should expect three-digit inflation rates. In this scenario, monthly and even weekly inflation rates become two digits, and prices increase at a very fast pace. It is possible that at the beginning of the week, goods may be 10% cheaper than at the end of the week.
However, there is no precise and specific definition of hyperinflation, but any country experiencing three-digit inflation rates is commonly referred to as experiencing hyperinflation by economists.
The biggest hyperinflations in the world
When discussing hyperinflation, experts always mention examples such as the millions of percent inflation in Zimbabwe in 2008 or the several thousand percent inflation in Venezuela at the beginning of 2019. These headlines are so famous that the term ‘Venezuelanization’ has even been coined to refer to economies on the brink of collapse.
Unbelievable scenes of the situation in these two countries have been recorded during the mentioned time periods, which depict the economic failure of these countries. For example, in January 2019, prices of goods in Caracas were increasing every hour to the extent that the government had to distribute free bread throughout the country. However, this government policy failed to have any impact on the people’s livelihoods, resulting in kilometer-long queues in major cities of this Latin American country.
Zimbabwean citizens have also witnessed days when in 2008, someone who intended to go to a restaurant tried to pay for their meal as soon as they entered the restaurant. The reason for this insistence of restaurant and shop visitors was the incredible and unbelievable increase in the prices of items during the course of eating. Therefore, customers preferred to pay for their meal at the moment of ordering to protect their assets from possible inflation that could swallow their wealth within 30 minutes.
The situation in Zimbabwe was such that the central bank of the country decided to print 100 billion dollar notes, which is the currency of Zimbabwe. The reason for this action was the rapid devaluation of the Zimbabwean dollar. The conditions were so dire that daily inflation exceeded 100%, meaning that prices of goods would double in just 24 hours. The central bank was forced to print banknotes with unbelievable numbers and figures.
Inflation in Iran
Looking at the statistics and figures recorded over the past 90 years, it can be said that Iran’s economy is currently in the most inflationary situation in almost a century. However, there have been much larger inflations in periods such as World War II and major famines, but these inflations occurred in shorter time frames and can be seen as sudden jumps in Iran’s economy.
However, in no period of modern Iranian history have we witnessed a ruling inflation rate of more than 40 percent over a period of four to five years. It should be noted that traditionally, the official inflation rate announced by authorities in Iran has always been lower than the inflation rate felt by citizens. However, it can be said that the Iranian economy has never been as inflationary and turbulent as it is now.
What is the future of the stock market’s inflationary growth in 1402?
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