Economic Collapse is Imminent

Economic collapse is imminent.

According to recent reports from Iran Gate, many economic actors and experts in the field believe that the country’s economy is rapidly heading towards a collapse, as the exchange rate continues to rise hourly without interruption. Is the increasing exchange rate in the free market a sign of an impending economic collapse in Iran?

The US dollar exchange rate in the Tehran free market has reached 57,400 tomans at the time of writing this report. Meanwhile, the value of the rial has been decreasing moment by moment, and the demand for dollars is also very heavy and crowded. Some predict that each US dollar will be traded for more than 60,000 tomans before the arrival of Nowruz 1402. If this prediction becomes a reality, it can be said that 1402 will be the season of Iran’s economic collapse.

Indicators of an economic collapse

Economists believe that the value of a country’s national currency is a thermometer of that country’s economy. In other words, if we use the US dollar, which is the world’s most important currency, as a benchmark for comparing with other currencies, we arrive at a price known as the exchange rate. The exchange rate is recognized in society and among the people as the price of the dollar. In this way, economists can draw a general picture of the economies of different countries by looking at the exchange rate of each country’s currency. Iran’s economy is no exception to this rule, and comparing the value of the Iranian rial against the dollar is widely accepted as the most important economic indicator among ordinary people and even experts in the field of economics.

It is therefore natural that if the trend of devaluation of a country’s national currency accelerates and this trend continues in the long term and even in the medium term, the likelihood of an economy collapsing and bankruptcy will be very high.

Another component that can be an indicator of the state of an economy is the inflation rate. Inflation, which is widely accepted as one of the most important factors for assessing the economic situation of a country, actually represents the pace of depreciation of a country’s national currency. In other words, the inflation rate reflects the speed of the process of devaluing a country’s national currency within a specific time period, annually or monthly. No developed country has ever been among countries with high inflation rates at any point in history and has always enjoyed stability in its currency market.

Unemployment rate and economic growth are also among other economic indicators that can reflect the economic conditions of a country. These two factors, which are closely related to each other, also have a meaningful relationship with the inflation rate or the monetary situation of countries.

The Iranian economy is on the verge of collapse.

Considering the four indicators mentioned earlier, it can be summarized that the Iranian economy has not yet reached the edge of the abyss, but it is moving towards it at an increasingly faster pace.

As mentioned, the most important indicator for assessing the condition of an economy is the inflation rate, or the pace of depreciation of the national currency. Therefore, the exchange rate of the Iranian rial against the US dollar can be considered as the main criterion. This rate indicates a decrease of over 100% in the price of the dollar in the past eleven months of the year 1401, and it is predicted that this figure will exceed 120% by the end of December.

Such a situation has only been experienced in economies that have collapsed, such as Zimbabwe during the presidency of Robert Mugabe, Venezuela in the past 10 years, and Bulgaria in the 1990s. Now, if we consider the performance of the current government in terms of preserving the value of the national currency as the main indicator of Iran’s economy, it can be said that the Iranian economy is completely on the path of decline.

The slow growth rate of inflation and economic growth are also among other signs that economists are concerned about the future collapse of Iran’s economy. In other words, examining the vital signs of Iran’s economy and comparing it to the broken economies of the world indicates that the country’s economy is in a steep decline.

Oil is the lifeline of the current government.

Although experts believe that oil can be a ray of hope for the government of Ibrahim Raisi to save the economy from disaster and bankruptcy, most economists agree that oil has played this role with varying degrees of success and failure since the 1950s. However, recent developments have led to the current thirteenth government losing its biggest economic support.

It is obvious that injecting oil dollars into any economy can at least temporarily strengthen the economic foundations of a country. However, this type of management is ultimately doomed to failure. But the prevalence of chronic mismanagement in the Raisi government shows that no one is thinking of finding a solution to the crisis, even in the short term. Apparently, all members of Raisi’s economic team have turned their attention to oil exports to countries such as China and India. But as mentioned, this lever of quick returns and prosperity is currently out of reach for the government of Iran.

The silence surrounding the revival of the JCPOA negotiations, as well as the start of nationwide protests in the past 5 months and the imposition of extensive sanctions by the United States and Europe, are among the most important factors that have led to a sharp decline in government oil revenues.

News about the oil dealings between Iran and China indicate an unprecedented reversal by Beijing in buying oil from Iran. Apparently, the Chinese, for various reasons including extensive pressure from the US to sanction Iranian government-affiliated companies, no longer have any inclination to accept the risk of buying oil from Iran.

Although the government reports an unprecedented and astonishing increase in oil revenues this year, experts estimate, based on available evidence, that the thirteenth government will be able to secure only 40% of the projected oil revenues in 1402 (Iranian calendar year). On the other hand, despite the announcement of a 500% increase in oil exports by the Rouhani administration, the Research Center of the Parliament has reported that less than 50% of the projected oil revenues have been realized in the first half of 1401.

Based on the current state of Iran’s economy, it can be said that the astronomical speed at which the economy is moving towards collapse is unprecedented. Even staunch media supporters have withdrawn their support for Rouhani’s economic policies. Now we have to wait and see if the economic team has a magic wand up its sleeve or if they will only be spectators of the country’s economic downfall.