Unprecedented Expansion of Poverty in 2023
Unprecedented Expansion of Poverty in 2023: According to Iran Gate, the dire living conditions of Iranian citizens have caused many to look at 2023 with concern, expecting much more difficult days ahead for managing the basic necessities of life.
A look at the statistics and figures related to inflation in recent months, along with its alignment with recent currency rate jumps, does not promise good days for Iran’s economy. Many economists believe that the administration of Ebrahim Raisi, due to a lack of principled and scientific economic management, has reached a point where even the government’s supporters have lost hope for improvement.
Optimistic Inflation Forecast for New Year’s Eve
Assessing inflation in various scenarios indicates worsening living conditions for Iranians in the early days of 2023. Economists from different schools of thought believe that even in the most optimistic scenario, an inflation rate of less than 50% for the eve of the solar new year is far from expected.
Even experts who have supported the government’s economic policies predict a 49% inflation for Nowruz 2023. If such inflation materializes in April 2023, it would mean breaking the inflation record of the past 30 years. It should also be noted that the coincidence of Nowruz and Ramadan can also play a role in exacerbating inflationary spikes.
In other words, two periods traditionally known in Iran’s economy for price surges will coincide this year, which could lead to an additional release of inflationary pressure on the market. However, some believe this calendar coincidence is one of the government’s good fortunes, as the inflationary release will occur all at once in April instead of in two separate periods, potentially reducing continuous price shocks on the middle and lower-income groups.
People’s Table in Nowruz 2023 with a Pessimistic Lens
However, another group of economists, who are indeed in the majority, report inflation rates of 57 to 59% in April 2023. In other words, it can be said that most experts and economic analysts believe Iranian households will start 2023 with inflation close to 60%, which means a further worsening of the situation for citizens.
According to this group of experts, if the price growth of goods and services continues along the same path as in recent months, the monthly inflation at the end of this year will be at least 3.5% and at most 4%. If this scenario materializes, point-to-point inflation in the current month will be recorded between 57 to 59%. If such figures are achieved, the annual inflation of 2022 will exceed 50%, which is unprecedented in the past 30 years.
People Await an Expensive Nowruz
The average monthly price growth in the 21 months that the thirteenth government has been in charge has been over 3.3%. If we consider only a 0.2% increase for this index in 2023, we should expect point-to-point inflation of more than 55% for the coming year. Consequently, the annual inflation, if this scenario occurs, will also be over 50%.
However, considering the price surges of essential goods in the market, it can be said that the food group will still have the highest inflation in April 2023. After the food and tobacco group, housing becomes the biggest problem for Iranian households, even leading to reverse migration from big cities to smaller towns and even villages. Although some believe this migration could solve the population concentration problem in the capital and metropolises, given the manner in which citizens are being pushed to the margins, it must be said that the devastating consequences of this type of migration far outweigh its benefits.
The automotive and transportation group is another category of consumer goods facing significant price surges. Currently, some products made by Iranian automakers are being traded in the market for over one billion tomans, which is unbelievable even for the most pessimistic observers. However, the continuation of the current conditions could exacerbate this situation, leading to more expensive cars and transportation services.
Wage Increases Dull the Edge of Inflation
Given the bitter experience of Iranian workers and employees grappling with inflation, it can be predicted that 2023 will also be a year of intensified pressure on household heads, as the rate of decline in the national currency’s value is much faster than the increase in wages and salaries, naturally leading to a significant annual decrease in purchasing power.
Now, if we optimistically and generously consider the 2023 inflation forecast to be in the 50% range, it must be said that employees, given a 20% increase in wages and benefits, will naturally lag behind inflation by at least 30%. All these factors convey only one message for Iran’s economy: an unprecedented shrinking of the middle class and an expansion of the absolute poverty range in the country.