A review of the government of Iranian President Ebrahim Raisi’s mid-term performance in terms of macroeconomic indicators and market movements shows the economy is faring worse today than it did before he took office in August 2021.

Two years into Raisi’s coming to power, Iranians are suffering from runaway inflation, declining purchasing power, depreciating national currency, a worsening water crisis, and shortage of electricity and gas (despite the country’s vast reserves) as markets remain affected by rent-seeking and speculative practices and fundamental drawbacks.

A study by Donya-e Eqtesad media group in Iran shows point-to-point inflation stood at 49.1% at the end of the first year of Raisi’s tenure.

The figure stood at 39.4% by the end of the incumbent's second year.

In comparison, the corresponding figures during former president Hassan Rouhani’s administration stood at 14.7% for the first year and 12.7% for his second year in office.

Notably, the country's currency, the rial, has lost around half of its value since Raisi became president, currently trading at IRR500,000 to one dollar in the free market.

To put other markets into perspective, the value of gold sovereigns coins has gained an average of 157%, while the benchmark index of the Tehran Stock Exchange (TSE) has only increased 48% since August 2021.

This is while streamlining the sorry state of the capital market — long plagued by recession-hit listed industries, inside trading and wild fluctuations —  was among the campaign promises of Raisi before he came to power.

Meanwhile, the Donya-e Eqtesad study indicates that Iran’s GDP growth improved under Raisi as the economy registered a 4.4% rise in the first year and a 4% increase in the second year of his presidency. The figures for the corresponding periods of Rouhani stood at -4.2% during the first year and 0.8% during the second year.

Growth led by exogenous factors

Although the growth figures have been higher under the incumbent president, experts say such rates have been realised under exogenous factors rather than investment and domestic economic growth.

Elaborating on the reasons for the economic growth rates reported of late, Iranian economist Vahid Shaghaghi Shahri recently told ILNA: “The first reason is that Iran's economy in the [13]90s [decade from Persian calendar year March 2011-12 to March 2021] shrank due to the intensification of sanctions and lack of investment, he said."  

"The average growth during the period was practically about 1%. An economy of 85 million people was shrunk up to the maximum, and I believe that Iran's economy could not shrink any further than this,” he added.

According to the expert, Iran’s gross domestic product at current prices dropped from about $500bn to less than $300bn during the period.

The positive economic growth figures reported were not a result of investments, as pointed out by Shaghaghi Shahri. Rather, the growth occurred due to Iran's economy hitting rock bottom and being unable to decline any further.

The second reason, he went on to say, is that Iran's oil exports have assumed an upward trend following the partial easing of sanctions.

“Unlike during Trump's presidency when severe pressure was imposed on our country and Iran's oil exports decreased to less than 300,000 barrels per day, during Biden's presidency and the reduction of sanctions, our oil exports have increased and reached 1.5mn bpd.”

The third reason, Shaghaghi explained, is the increase in oil prices.

“Along with the increase in oil exports, the global prices also increased and the dollar value of non-oil exports rose.”

These three factors worked hand in hand to make Iran's economic growth positive during last year and this year, he concluded.