Disaster in Iran’s Economy: Internet Shutdown Negatively Impacts Economic Growth, Part Two
Disaster in Iran’s Economy: Internet Shutdown Negatively Impacts Economic Growth. Experts believe that the livelihood of more than 10 million Iranian citizens has faced serious danger in the past two weeks due to the internet shutdown. Business owners are also deeply concerned about the permanent shutdown of the internet in the country or the continuation of social media filtering, including Instagram.
Observers believe that the behavior of Ebrahim Raisi’s government in the past two weeks indicates tendencies to make the internet shutdown permanent, or at least to enforce some recent restrictions. Recent reports on the government’s approach to limiting Iranian users’ access to the internet show that some officials in Raisi’s government have directly organized extensive actions to intensify these restrictions. Experts also express concern, stating that the risk of the government’s continued policies for virtual businesses is much higher than previously imagined.
Iran Gate, in the third part of its series of reports examining the damage of internet shutdowns to Iran’s economy, has conducted calculations regarding the destruction of the country’s economic infrastructure following the implementation of policies imposing restrictions and filtering of the virtual space. According to these calculations, the promise of 8% growth in such circumstances, where more than 11 million people have effectively lost their businesses, is nothing but a dream.
Farewell to Economic Growth
According to Iran Gate’s calculations, the internet business sector in Iran, which directly supports the livelihood of 11 million people, accounts for about 8% of Iran’s total GDP. In other words, it can be said that Raisi’s government, by shutting down the internet and filtering social networks, has not only endangered the livelihood of 11 million Iranians but has practically shut down about 10% of Iran’s entire economy.
This comes as Raisi and the members of the thirteenth cabinet have repeatedly promised an 8% growth for Iran’s economy. Although experts believed that even when these slogans were being made, the possibility of achieving an 8% growth was not feasible, it seems that with the new approach of the government regarding the widespread internet shutdown, even the slightest chance of achieving this growth has vanished.
For this reason, many believe that Raisi, by imposing widespread internet restrictions, has effectively paved the way for bidding farewell to his grandiose slogan of achieving significant economic growth. Some also believe that if user access restrictions in the virtual space continue in the medium and long term, the possibility of negative economic growth is also on the table.
Because with this action, the government will disable one of the driving engines of the economy, which is independent and dynamic, and this action by the thirteenth government will undoubtedly turn into an economic disaster that will affect not only 11 million people but all Iranian citizens.
What Will Happen to Knowledge-Based Companies?
The current situation in Iran has severely alarmed many investors in the startup and knowledge-based sectors. This is while the government has repeatedly emphasized the need to strengthen the knowledge-based sectors of the economy and has even allocated substantial budgets to some so-called knowledge-based companies. Most experts believe that the budget that Raisi’s government has so far allocated to some companies labeled as knowledge-based is akin to pouring national wealth into a bottomless pit that has had no clear and tangible output for the Iranian nation. This approach by Raisi has not only failed to boost the country’s economy but has also not been a solution for the government itself.
Many specialists believe that the Islamic Republic’s goal of investing in sectors it calls knowledge-based is to create a foundation for imposing further restrictions in the virtual space. Restrictions aimed at preventing the free flow of information, with clear signs of this also visible in various companies and institutions, including the Infrastructure Communications Company and Abr Arvan.
However, a look at the public’s reception of domestic knowledge-based products indicates the government’s failure in this area. In fact, it should be said that the government has not only spent the country’s resources against Iran’s national interests but has also failed to gain any specific benefit for itself. Now it is unclear what the government’s plan will be with this high number of knowledge-based companies.
Companies that have no sustainable income and are solely reliant on the generous hand of Raisi’s government, a government that not only cannot meet the expectations of these entities but is also unable to cover its own current expenses and is facing an unprecedented budget deficit in the history of Iran’s economy.
Impact of Permanent Instagram Filtering on the Economy
Yesterday, the Minister of Communications of Raisi’s government also warned businesses active on social networks to transfer their activities and investments to similar domestic platforms. Many observers interpreted this warning by Issa Zarepour as the government’s intention to permanently filter Instagram. Indeed, evidence of such an intention has been observed in recent days, with suspicious movements by state media to create an atmosphere for restricting Instagram access for Iranian users being among the most significant.
Economists believe that given the inefficiency of domestic platforms and the significant share of virtual businesses, of which Instagram is a key component, this could lead to an economic disaster in the medium and even short term. As mentioned, such an approach will not only likely result in negative economic growth but will also impose new heavy costs on the government.
Costs that, in the current situation, cannot be covered by stable income sources, forcing the government to borrow from the Central Bank’s resources, whether directly or indirectly, which will inevitably result in a sharp and sudden spike in inflation in a short time.
In fact, it should be said that with the intensification of filtering and internet shutdowns, Raisi’s government has not only disrupted the livelihood of more than 11 million people but has also brought a large country’s economy like Iran to the brink of collapse due to the significant share of internet businesses. A brink that undoubtedly has beneficiaries who these days appear as the main encouragers of the government to impose even more restrictions in the virtual space.
The previous part of this article, titled ‘Who Benefits from the Internet Shutdown?’ has been published.
Additionally, Iran Gate has exclusively analyzed and examined the internet shutdown.
- What is the Cost of Instagram Filtering and Internet Shutdown?
- The Slow Internet in Iran: Who’s Stepping on Iran’s Internet Cable?