Economic collapse is imminent
Economic collapse is imminent. According to Iran Gate, recently, with the hourly and unstoppable increase in the exchange rate, many economic activists and experts in this field believe that the country’s economy is rapidly moving towards a downfall. Is the approach of the dollar rate in the free market a sign of the impending collapse of Iran’s economy?
The US dollar rate in the Tehran free market has been recorded at 57,400 tomans at the time of writing this report. Meanwhile, the value of the rial has been decreasing exponentially and instantaneously, and the queue for buying dollars is very long and crowded. Some predict that each US dollar will be traded for over 60,000 tomans before the arrival of Nowruz 1402. If such a prediction becomes reality, it can be said that the year 1402 will be the season of Iran’s economic downfall.
Signs of an economy’s collapse
Economists believe that the value of a country’s national currency is the thermometer of that country’s economy. In other words, if we consider the dollar, which is the most important global currency, as a benchmark for comparison with other countries’ currencies, we arrive at a price known as the exchange rate. The exchange rate in society and among the general public is known as the dollar price. In other words, economists can paint a general picture of the state of various world economies by looking at each country’s exchange rate. Iran’s economy is no exception to this rule, and the comparison of the rial’s value against the dollar is accepted as the most important economic indicator among the general public and even economic experts.
Therefore, it is natural that if the trend of a country’s national currency value decline accelerates and this trend continues in the long term and even the medium term, the likelihood of an economy falling into the abyss of bankruptcy is very high.
Another factor that can indicate the state of an economy is the inflation rate. Inflation, which is accepted worldwide as one of the most important factors for evaluating a country’s economic position, actually reveals the rate of decline in a country’s national currency value. In other words, the inflation rate indicates the speed of the process of a country’s national currency value decline over a specific annual or monthly period. No developed country at any point in history has been among the countries with high inflation and has always enjoyed stability in its money market.
Unemployment rate and economic growth are also among other economic indicators that can reflect a country’s economic conditions. These two factors, which are closely related to each other, again have a meaningful relationship with the inflation rate and the status of national currencies.
Iran’s economy is on the brink of collapse
Considering the four indicators mentioned earlier, it can be said in summary that Iran’s economy has not yet reached the edge of the cliff but is moving towards it with full speed.
As stated, the most important indicator for evaluating an economy’s status is the inflation rate or the rate of decline in national currency value. Therefore, the exchange rate of the rial against the US dollar can be considered the main criterion. A criterion that indicates a more than 100% increase in the dollar price in the eleven months passed of the year 1401 and is predicted to exceed 120% by the end of Esfand.
Such a situation has only been experienced in economies that have collapsed. For example, economies like Zimbabwe during Robert Mugabe’s presidency, Venezuela in the last 10 years, and Bulgaria in the 1990s have faced such conditions. Now, if we are to consider the performance of Raisi’s government in maintaining the national currency value as the main thermometer of Iran’s economy, it can be said that Iran’s economy is completely on the path of collapse.
The rate of inflation growth and the very insignificant economic growth are also among other signs that have raised economists’ concerns about the collapse of Iran’s economy in the not-too-distant future. In other words, it can be said that examining the vital signs of Iran’s economy and comparing it with shattered world economies indicates that the country’s economy is on a downhill slope.
Oil as the government’s lifeline
Although experts believe that oil can be a glimmer of hope for Ebrahim Raisi’s government to temporarily save the economy from the disaster of bankruptcy, the vast majority of economists believe that oil has played this role with varying intensity since the early 1970s. However, currently, changes have occurred that have caused the thirteenth government to lose its biggest economic support.
It is clear that injecting oil dollars into any economy can at least temporarily strengthen a country’s economic foundations. However, this type of management is ultimately doomed to fail. But the epidemic of daily routine in Raisi’s government shows that no one is thinking about finding a solution to get out of the crisis, even in the short term. Apparently, all members of Raisi’s economic team are relying on the opening of oil exports to countries like China and India. Yet, as mentioned, this quick-fix lever in Iran’s economy is currently out of the government’s reach.
The suspension of the JCPOA revival negotiations and the start of nationwide protests in the last 5 months, along with the imposition of extensive sanctions by the US and Europe, are among the most important factors that have led to a sharp decline in the government’s oil revenues.
Reports from oil dealings between Iran and China also indicate an unprecedented turning away by Beijing from purchasing oil from Iran. Apparently, the Chinese, due to various reasons including extensive US pressures aimed at sanctioning companies cooperating with the Iranian government, are no longer willing to take the risk of buying oil from Iran.
Although the government announces an unprecedented and astonishing increase in oil revenues this year, experts, based on existing evidence, estimate that the thirteenth government will be able to achieve only 40% of the projected oil revenues in the year 1402 at best. On the other hand, despite reports of a 500% increase in oil exports under Raisi’s government, the Parliament’s Research Center reports less than 50% realization of oil revenues in the first half of 1401.
Based on the evidence observed from the current state of Iran’s economy, it can be said that the astronomical speed of the economy’s movement towards collapse is so high and unprecedented that even hardline media activists have stopped their unconditional support for Raisi’s government’s economic policies. Now, we must wait and see if the economic team has a magic wand up its sleeve or if it will merely watch the country’s economy fall.